Correlation Between China Construction and Bank of Communications Co
Can any of the company-specific risk be diversified away by investing in both China Construction and Bank of Communications Co 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 Bank of Communications Co 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 Bank of Communications, you can compare the effects of market volatilities on China Construction and Bank of Communications Co 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 Bank of Communications Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Bank of Communications Co.
Diversification Opportunities for China Construction and Bank of Communications Co
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Bank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Bank of Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Communications Co 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 Bank of Communications Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Communications Co has no effect on the direction of China Construction i.e., China Construction and Bank of Communications Co go up and down completely randomly.
Pair Corralation between China Construction and Bank of Communications Co
Assuming the 90 days horizon China Construction Bank is expected to generate 1.15 times more return on investment than Bank of Communications Co. However, China Construction is 1.15 times more volatile than Bank of Communications. It trades about 0.05 of its potential returns per unit of risk. Bank of Communications is currently generating about 0.05 per unit of risk. If you would invest 51.00 in China Construction Bank on September 3, 2024 and sell it today you would earn a total of 21.00 from holding China Construction Bank or generate 41.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.95% |
| Values | Daily Returns |
China Construction Bank vs. Bank of Communications
Performance |
| Timeline |
| China Construction Bank |
| Bank of Communications Co |
China Construction and Bank of Communications Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Bank of Communications Co
The main advantage of trading using opposite China Construction and Bank of Communications Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Bank of Communications Co 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 Bank of Communications Co will offset losses from the drop in Bank of Communications Co's long position.| China Construction vs. Bank of America | China Construction vs. Bank of America | China Construction vs. Agricultural Bank | China Construction vs. Bank of America |
| Bank of Communications Co vs. Bank of China | Bank of Communications Co vs. Bank of America | Bank of Communications Co vs. ABN AMRO Bank | Bank of Communications Co vs. Banco Bilbao Viscaya |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |