Correlation Between China Construction and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both China Construction and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank, you can compare the effects of market volatilities on China Construction and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Commonwealth Bank.
Diversification Opportunities for China Construction and Commonwealth Bank
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Commonwealth is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of China Construction i.e., China Construction and Commonwealth Bank go up and down completely randomly.
Pair Corralation between China Construction and Commonwealth Bank
If you would invest 8,768 in Commonwealth Bank on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Commonwealth Bank or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China Construction Bank vs. Commonwealth Bank
Performance |
| Timeline |
| China Construction Bank |
| Commonwealth Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Construction and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Commonwealth Bank
The main advantage of trading using opposite China Construction and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank'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 |
| Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. China Construction Bank | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. ANZ Group Holdings |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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