Correlation Between China Construction and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both China Construction and Chesapeake Utilities 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 Chesapeake Utilities 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 Chesapeake Utilities, you can compare the effects of market volatilities on China Construction and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Chesapeake Utilities.
Diversification Opportunities for China Construction and Chesapeake Utilities
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Chesapeake is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of China Construction i.e., China Construction and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between China Construction and Chesapeake Utilities
Assuming the 90 days horizon China Construction Bank is expected to generate 1.83 times more return on investment than Chesapeake Utilities. However, China Construction is 1.83 times more volatile than Chesapeake Utilities. It trades about 0.07 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.09 per unit of risk. If you would invest 53.00 in China Construction Bank on September 12, 2024 and sell it today you would earn a total of 24.00 from holding China Construction Bank or generate 45.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Chesapeake Utilities
Performance |
| Timeline |
| China Construction Bank |
| Chesapeake Utilities |
China Construction and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Chesapeake Utilities
The main advantage of trading using opposite China Construction and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Chesapeake Utilities 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 Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' long position.| China Construction vs. Chesapeake Utilities | China Construction vs. AM EAGLE OUTFITTERS | China Construction vs. Playa Hotels Resorts | China Construction vs. Canadian Utilities Limited |
| Chesapeake Utilities vs. AIR PRODCHEMICALS | Chesapeake Utilities vs. National Storage Affiliates | Chesapeake Utilities vs. SHIN ETSU CHEMICAL | Chesapeake Utilities vs. X FAB Silicon Foundries |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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