Correlation Between China Construction and National Australia
Can any of the company-specific risk be diversified away by investing in both China Construction and National Australia 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 National Australia 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 National Australia Bank, you can compare the effects of market volatilities on China Construction and National Australia 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 National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and National Australia.
Diversification Opportunities for China Construction and National Australia
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and National is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia 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 National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of China Construction i.e., China Construction and National Australia go up and down completely randomly.
Pair Corralation between China Construction and National Australia
Assuming the 90 days horizon China Construction Bank is expected to generate 5.54 times more return on investment than National Australia. However, China Construction is 5.54 times more volatile than National Australia Bank. It trades about 0.09 of its potential returns per unit of risk. National Australia Bank is currently generating about -0.06 per unit of risk. If you would invest 75.00 in China Construction Bank on August 27, 2024 and sell it today you would earn a total of 4.00 from holding China Construction Bank or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
China Construction Bank vs. National Australia Bank
Performance |
| Timeline |
| China Construction Bank |
| National Australia Bank |
China Construction and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and National Australia
The main advantage of trading using opposite China Construction and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, National Australia 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 National Australia will offset losses from the drop in National Australia's long position.| China Construction vs. Svenska Handelsbanken PK | China Construction vs. Industrial and Commercial | China Construction vs. Bank of America | China Construction vs. Bank of America |
| National Australia vs. National Australia Bank | National Australia vs. China Construction Bank | National Australia vs. Bank of America | National Australia 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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