Correlation Between China Construction and INSURANCE AUST
Can any of the company-specific risk be diversified away by investing in both China Construction and INSURANCE AUST 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 INSURANCE AUST 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 INSURANCE AUST GRP, you can compare the effects of market volatilities on China Construction and INSURANCE AUST 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 INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and INSURANCE AUST.
Diversification Opportunities for China Construction and INSURANCE AUST
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and INSURANCE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of China Construction i.e., China Construction and INSURANCE AUST go up and down completely randomly.
Pair Corralation between China Construction and INSURANCE AUST
Assuming the 90 days horizon China Construction Bank is expected to generate 1.33 times more return on investment than INSURANCE AUST. However, China Construction is 1.33 times more volatile than INSURANCE AUST GRP. It trades about 0.15 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.13 per unit of risk. If you would invest 71.00 in China Construction Bank on September 13, 2024 and sell it today you would earn a total of 5.00 from holding China Construction Bank or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. INSURANCE AUST GRP
Performance |
| Timeline |
| China Construction Bank |
| INSURANCE AUST GRP |
China Construction and INSURANCE AUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and INSURANCE AUST
The main advantage of trading using opposite China Construction and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, INSURANCE AUST 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 INSURANCE AUST will offset losses from the drop in INSURANCE AUST's long position.| China Construction vs. INSURANCE AUST GRP | China Construction vs. QBE Insurance Group | China Construction vs. Safety Insurance Group | China Construction vs. Lion One Metals |
| INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc | INSURANCE AUST vs. Apple Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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