Correlation Between China Construction and NNRF
Can any of the company-specific risk be diversified away by investing in both China Construction and NNRF 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 NNRF 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 NNRF Inc, you can compare the effects of market volatilities on China Construction and NNRF 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 NNRF. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and NNRF.
Diversification Opportunities for China Construction and NNRF
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and NNRF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and NNRF Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NNRF Inc 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 NNRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NNRF Inc has no effect on the direction of China Construction i.e., China Construction and NNRF go up and down completely randomly.
Pair Corralation between China Construction and NNRF
Assuming the 90 days horizon China Construction is expected to generate 1.47 times less return on investment than NNRF. But when comparing it to its historical volatility, China Construction Bank is 3.44 times less risky than NNRF. It trades about 0.07 of its potential returns per unit of risk. NNRF Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.59 in NNRF Inc on August 27, 2024 and sell it today you would lose (0.36) from holding NNRF Inc or give up 61.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.91% |
| Values | Daily Returns |
China Construction Bank vs. NNRF Inc
Performance |
| Timeline |
| China Construction Bank |
| NNRF Inc |
China Construction and NNRF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and NNRF
The main advantage of trading using opposite China Construction and NNRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, NNRF 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 NNRF will offset losses from the drop in NNRF'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 |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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