Correlation Between China Construction and PT Gudang
Can any of the company-specific risk be diversified away by investing in both China Construction and PT Gudang 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 PT Gudang 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 PT Gudang Garam, you can compare the effects of market volatilities on China Construction and PT Gudang 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 PT Gudang. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and PT Gudang.
Diversification Opportunities for China Construction and PT Gudang
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and GGG is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and PT Gudang Garam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gudang Garam 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 PT Gudang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gudang Garam has no effect on the direction of China Construction i.e., China Construction and PT Gudang go up and down completely randomly.
Pair Corralation between China Construction and PT Gudang
Assuming the 90 days horizon China Construction Bank is expected to generate 0.65 times more return on investment than PT Gudang. However, China Construction Bank is 1.55 times less risky than PT Gudang. It trades about 0.09 of its potential returns per unit of risk. PT Gudang Garam is currently generating about -0.06 per unit of risk. If you would invest 63.00 in China Construction Bank on September 3, 2024 and sell it today you would earn a total of 9.00 from holding China Construction Bank or generate 14.29% 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. PT Gudang Garam
Performance |
| Timeline |
| China Construction Bank |
| PT Gudang Garam |
China Construction and PT Gudang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and PT Gudang
The main advantage of trading using opposite China Construction and PT Gudang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, PT Gudang 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 PT Gudang will offset losses from the drop in PT Gudang's long position.| China Construction vs. HSBC Holdings plc | China Construction vs. Bank of China | China Construction vs. Commonwealth Bank of |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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