Correlation Between China Construction and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both China Construction and Hercules Capital 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 China Construction and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Construction Bank and Hercules Capital, you can compare the effects of market volatilities on China Construction and Hercules Capital 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 China Construction with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Hercules Capital.
Diversification Opportunities for China Construction and Hercules Capital
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Hercules is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and China Construction 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 China Construction Bank are associated (or correlated) with Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of China Construction i.e., China Construction and Hercules Capital go up and down completely randomly.
Pair Corralation between China Construction and Hercules Capital
Assuming the 90 days horizon China Construction Bank is expected to generate 1.19 times more return on investment than Hercules Capital. However, China Construction is 1.19 times more volatile than Hercules Capital. It trades about 0.33 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.08 per unit of risk. If you would invest 71.00 in China Construction Bank on September 25, 2024 and sell it today you would earn a total of 7.00 from holding China Construction Bank or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
China Construction Bank vs. Hercules Capital
Performance |
| Timeline |
| China Construction Bank |
| Hercules Capital |
China Construction and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Hercules Capital
The main advantage of trading using opposite China Construction and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Hercules Capital 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 Hercules Capital will offset losses from the drop in Hercules Capital's long position.| China Construction vs. Wells Fargo | China Construction vs. HSBC Holdings plc | China Construction vs. HSBC Holdings plc | China Construction vs. Agricultural Bank of |
| Hercules Capital vs. HEMISPHERE EGY | Hercules Capital vs. Spirent Communications plc | Hercules Capital vs. Sixt Leasing SE | Hercules Capital vs. United Internet AG |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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