Correlation Between China Construction and BP Plc
Can any of the company-specific risk be diversified away by investing in both China Construction and BP Plc 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 BP Plc 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 BP plc, you can compare the effects of market volatilities on China Construction and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and BP Plc.
Diversification Opportunities for China Construction and BP Plc
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and BSU is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of China Construction i.e., China Construction and BP Plc go up and down completely randomly.
Pair Corralation between China Construction and BP Plc
Assuming the 90 days horizon China Construction Bank is expected to under-perform the BP Plc. In addition to that, China Construction is 1.57 times more volatile than BP plc. It trades about -0.01 of its total potential returns per unit of risk. BP plc is currently generating about 0.14 per unit of volatility. If you would invest 2,614 in BP plc on September 1, 2024 and sell it today you would earn a total of 126.00 from holding BP plc or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. BP plc
Performance |
| Timeline |
| China Construction Bank |
| BP plc |
China Construction and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and BP Plc
The main advantage of trading using opposite China Construction and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| China Construction vs. OURGAME INTHOLDL 00005 | China Construction vs. Penn National Gaming | China Construction vs. Marie Brizard Wine | China Construction vs. Media and Games |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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