Correlation Between China Construction and Nu Holdings
Can any of the company-specific risk be diversified away by investing in both China Construction and Nu Holdings 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 Nu Holdings 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 Nu Holdings, you can compare the effects of market volatilities on China Construction and Nu Holdings 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 Nu Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Nu Holdings.
Diversification Opportunities for China Construction and Nu Holdings
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Nu Holdings is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings 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 Nu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Holdings has no effect on the direction of China Construction i.e., China Construction and Nu Holdings go up and down completely randomly.
Pair Corralation between China Construction and Nu Holdings
Assuming the 90 days horizon China Construction Bank is expected to generate 0.95 times more return on investment than Nu Holdings. However, China Construction Bank is 1.06 times less risky than Nu Holdings. It trades about -0.01 of its potential returns per unit of risk. Nu Holdings is currently generating about -0.14 per unit of risk. If you would invest 75.00 in China Construction Bank on August 24, 2024 and sell it today you would lose (1.00) from holding China Construction Bank or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Nu Holdings
Performance |
| Timeline |
| China Construction Bank |
| Nu Holdings |
China Construction and Nu Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Nu Holdings
The main advantage of trading using opposite China Construction and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Nu Holdings 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 Nu Holdings will offset losses from the drop in Nu Holdings' long position.| China Construction vs. Svenska Handelsbanken PK | China Construction vs. ANZ Group Holdings | China Construction vs. Westpac Banking | China Construction vs. National Australia Bank |
| Nu Holdings vs. Banco Bradesco SA | Nu Holdings vs. Itau Unibanco Banco | Nu Holdings vs. Banco Santander Brasil | Nu Holdings vs. Western Alliance Bancorporation |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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