Correlation Between China Construction and Penn National
Can any of the company-specific risk be diversified away by investing in both China Construction and Penn National 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 Penn National 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 Penn National Gaming, you can compare the effects of market volatilities on China Construction and Penn National 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 Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Penn National.
Diversification Opportunities for China Construction and Penn National
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Penn is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of China Construction i.e., China Construction and Penn National go up and down completely randomly.
Pair Corralation between China Construction and Penn National
Assuming the 90 days horizon China Construction Bank is expected to generate 0.68 times more return on investment than Penn National. However, China Construction Bank is 1.48 times less risky than Penn National. It trades about 0.03 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.0 per unit of risk. If you would invest 60.00 in China Construction Bank on September 4, 2024 and sell it today you would earn a total of 12.00 from holding China Construction Bank or generate 20.0% 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. Penn National Gaming
Performance |
| Timeline |
| China Construction Bank |
| Penn National Gaming |
China Construction and Penn National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Penn National
The main advantage of trading using opposite China Construction and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Penn National 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 Penn National will offset losses from the drop in Penn National's long position.| China Construction vs. MOVIE GAMES SA | China Construction vs. ALERION CLEANPOWER | China Construction vs. GEAR4MUSIC LS 10 | China Construction vs. HANOVER INSURANCE |
| Penn National vs. CARSALESCOM | Penn National vs. Lery Seafood Group | Penn National vs. Dairy Farm International | Penn National vs. COMMERCIAL VEHICLE |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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