Correlation Between Banco Bilbao and China Construction
Can any of the company-specific risk be diversified away by investing in both Banco Bilbao and China Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Banco Bilbao and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Bilbao Vizcaya and China Construction Bank, you can compare the effects of market volatilities on Banco Bilbao and China Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Banco Bilbao with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and China Construction.
Diversification Opportunities for Banco Bilbao and China Construction
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and China is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank and Banco Bilbao is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Banco Bilbao Vizcaya are associated (or correlated) with China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and China Construction go up and down completely randomly.
Pair Corralation between Banco Bilbao and China Construction
Assuming the 90 days horizon Banco Bilbao is expected to generate 1.31 times less return on investment than China Construction. But when comparing it to its historical volatility, Banco Bilbao Vizcaya is 1.14 times less risky than China Construction. It trades about 0.05 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 55.00 in China Construction Bank on October 24, 2024 and sell it today you would earn a total of 20.00 from holding China Construction Bank or generate 36.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 88.79% |
| Values | Daily Returns |
Banco Bilbao Vizcaya vs. China Construction Bank
Performance |
| Timeline |
| Banco Bilbao Vizcaya |
| China Construction Bank |
Banco Bilbao and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bilbao and China Construction
The main advantage of trading using opposite Banco Bilbao and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao position performs unexpectedly, China Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Construction will offset losses from the drop in China Construction's long position.| Banco Bilbao vs. Agricultural Bank | Banco Bilbao vs. Bank of America | Banco Bilbao vs. Bank of America | Banco Bilbao vs. Commonwealth Bank of |
| China Construction vs. Svenska Handelsbanken PK | China Construction vs. Industrial and Commercial | China Construction vs. Bank of America | China Construction vs. Bank of America |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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