Correlation Between China Construction and Bank of America
Can any of the company-specific risk be diversified away by investing in both China Construction and Bank of America 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 America 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 America, you can compare the effects of market volatilities on China Construction and Bank of America 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 America. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Bank of America.
Diversification Opportunities for China Construction and Bank of America
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Bank is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 America. 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 America has no effect on the direction of China Construction i.e., China Construction and Bank of America go up and down completely randomly.
Pair Corralation between China Construction and Bank of America
Assuming the 90 days horizon China Construction Bank is expected to generate 5.22 times more return on investment than Bank of America. However, China Construction is 5.22 times more volatile than Bank of America. It trades about 0.07 of its potential returns per unit of risk. Bank of America is currently generating about 0.24 per unit of risk. If you would invest 71.00 in China Construction Bank on August 26, 2024 and sell it today you would earn a total of 8.00 from holding China Construction Bank or generate 11.27% 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. Bank of America
Performance |
| Timeline |
| China Construction Bank |
| Bank of America |
China Construction and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Bank of America
The main advantage of trading using opposite China Construction and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Bank of America 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 America will offset losses from the drop in Bank of America's long position.| China Construction vs. ANZ Group Holdings | China Construction vs. Agricultural Bank | China Construction vs. Industrial and Commercial | China Construction vs. Bank of America |
| Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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