Correlation Between CHINA CONBANK and Obayashi
Can any of the company-specific risk be diversified away by investing in both CHINA CONBANK and Obayashi 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 CONBANK and Obayashi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA BANK ADR20 and Obayashi, you can compare the effects of market volatilities on CHINA CONBANK and Obayashi 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 CONBANK with a short position of Obayashi. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA CONBANK and Obayashi.
Diversification Opportunities for CHINA CONBANK and Obayashi
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CHINA and Obayashi is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and Obayashi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obayashi and CHINA CONBANK 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 BANK ADR20 are associated (or correlated) with Obayashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obayashi has no effect on the direction of CHINA CONBANK i.e., CHINA CONBANK and Obayashi go up and down completely randomly.
Pair Corralation between CHINA CONBANK and Obayashi
Assuming the 90 days trading horizon CHINA CONBANK is expected to generate 1.26 times less return on investment than Obayashi. But when comparing it to its historical volatility, CHINA BANK ADR20 is 1.71 times less risky than Obayashi. It trades about 0.15 of its potential returns per unit of risk. Obayashi is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Obayashi on November 28, 2024 and sell it today you would earn a total of 50.00 from holding Obayashi or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CHINA BANK ADR20 vs. Obayashi
Performance |
| Timeline |
| CHINA BANK ADR20 |
| Obayashi |
CHINA CONBANK and Obayashi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA CONBANK and Obayashi
The main advantage of trading using opposite CHINA CONBANK and Obayashi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA CONBANK position performs unexpectedly, Obayashi 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 Obayashi will offset losses from the drop in Obayashi's long position.| CHINA CONBANK vs. EMPEROR ENT HOTEL | CHINA CONBANK vs. Suntory Beverage Food | CHINA CONBANK vs. Sunstone Hotel Investors | CHINA CONBANK vs. Emperor Entertainment Hotel |
| Obayashi vs. GAZTRTECHNIUADR15EO01 | Obayashi vs. Addtech AB | Obayashi vs. Kingdee International Software | Obayashi vs. Sunny Optical Technology |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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