Correlation Between China Construction and NN Group
Can any of the company-specific risk be diversified away by investing in both China Construction and NN Group 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 NN Group 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 NN Group NV, you can compare the effects of market volatilities on China Construction and NN Group 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 NN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and NN Group.
Diversification Opportunities for China Construction and NN Group
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and NNGPF is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV 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 NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of China Construction i.e., China Construction and NN Group go up and down completely randomly.
Pair Corralation between China Construction and NN Group
Assuming the 90 days horizon China Construction Bank is expected to generate 2.08 times more return on investment than NN Group. However, China Construction is 2.08 times more volatile than NN Group NV. It trades about 0.06 of its potential returns per unit of risk. NN Group NV is currently generating about 0.06 per unit of risk. If you would invest 52.00 in China Construction Bank on October 20, 2024 and sell it today you would earn a total of 23.00 from holding China Construction Bank or generate 44.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.5% |
| Values | Daily Returns |
China Construction Bank vs. NN Group NV
Performance |
| Timeline |
| China Construction Bank |
| NN Group NV |
China Construction and NN Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and NN Group
The main advantage of trading using opposite China Construction and NN Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, NN Group 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 NN Group will offset losses from the drop in NN Group'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 |
| NN Group vs. NN Group NV | NN Group vs. Swiss Life Holding | NN Group vs. PICC Property and | NN Group vs. AXA SA |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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