Correlation Between China Construction and Aterian
Can any of the company-specific risk be diversified away by investing in both China Construction and Aterian 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 Aterian 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 Aterian, you can compare the effects of market volatilities on China Construction and Aterian 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 Aterian. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Aterian.
Diversification Opportunities for China Construction and Aterian
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Aterian is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian 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 Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of China Construction i.e., China Construction and Aterian go up and down completely randomly.
Pair Corralation between China Construction and Aterian
Assuming the 90 days horizon China Construction Bank is expected to generate 0.85 times more return on investment than Aterian. However, China Construction Bank is 1.18 times less risky than Aterian. It trades about -0.01 of its potential returns per unit of risk. Aterian is currently generating about -0.16 per unit of risk. If you would invest 75.00 in China Construction Bank on August 24, 2024 and sell it today you would lose (1.00) from holding China Construction Bank or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Construction Bank vs. Aterian
Performance |
| Timeline |
| China Construction Bank |
| Aterian |
China Construction and Aterian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Aterian
The main advantage of trading using opposite China Construction and Aterian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Aterian 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 Aterian will offset losses from the drop in Aterian's long position.| China Construction vs. Svenska Handelsbanken PK | China Construction vs. ANZ Group Holdings | China Construction vs. Westpac Banking | China Construction vs. National Australia Bank |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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