Correlation Between China Construction and Svenska Handelsbanken
Can any of the company-specific risk be diversified away by investing in both China Construction and Svenska Handelsbanken 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 Svenska Handelsbanken 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 Svenska Handelsbanken PK, you can compare the effects of market volatilities on China Construction and Svenska Handelsbanken 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 Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Svenska Handelsbanken.
Diversification Opportunities for China Construction and Svenska Handelsbanken
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Svenska is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Svenska Handelsbanken PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of China Construction i.e., China Construction and Svenska Handelsbanken go up and down completely randomly.
Pair Corralation between China Construction and Svenska Handelsbanken
Assuming the 90 days horizon China Construction Bank is expected to generate 3.03 times more return on investment than Svenska Handelsbanken. However, China Construction is 3.03 times more volatile than Svenska Handelsbanken PK. It trades about 0.09 of its potential returns per unit of risk. Svenska Handelsbanken PK is currently generating about -0.26 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 | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Svenska Handelsbanken PK
Performance |
| Timeline |
| China Construction Bank |
| Svenska Handelsbanken |
China Construction and Svenska Handelsbanken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Svenska Handelsbanken
The main advantage of trading using opposite China Construction and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Svenska Handelsbanken 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 Svenska Handelsbanken will offset losses from the drop in Svenska Handelsbanken'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 |
| Svenska Handelsbanken vs. China Construction Bank | Svenska Handelsbanken vs. Industrial and Commercial | Svenska Handelsbanken vs. Bank of America | Svenska Handelsbanken 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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