Correlation Between PT Bank and China Construction
Can any of the company-specific risk be diversified away by investing in both PT Bank 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 PT Bank and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Rakyat and China Construction Bank, you can compare the effects of market volatilities on PT Bank 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 PT Bank with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and China Construction.
Diversification Opportunities for PT Bank and China Construction
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BYRA and China is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat 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 PT Bank 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 PT Bank Rakyat 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 PT Bank i.e., PT Bank and China Construction go up and down completely randomly.
Pair Corralation between PT Bank and China Construction
Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the China Construction. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Rakyat is 1.08 times less risky than China Construction. The stock trades about -0.2 of its potential returns per unit of risk. The China Construction Bank is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 72.00 in China Construction Bank on August 28, 2024 and sell it today you would lose (2.00) from holding China Construction Bank or give up 2.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bank Rakyat vs. China Construction Bank
Performance |
| Timeline |
| PT Bank Rakyat |
| China Construction Bank |
PT Bank and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and China Construction
The main advantage of trading using opposite PT Bank and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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.The idea behind PT Bank Rakyat and China Construction Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Construction vs. Superior Plus Corp | China Construction vs. NMI Holdings | China Construction vs. Origin Agritech | China Construction vs. SIVERS SEMICONDUCTORS AB |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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