Correlation Between China Construction and Bank of China Ltd ADR
Can any of the company-specific risk be diversified away by investing in both China Construction and Bank of China Ltd ADR 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 Bank of China Ltd ADR 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 Bank of China, you can compare the effects of market volatilities on China Construction and Bank of China Ltd ADR 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 Bank of China Ltd ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Bank of China Ltd ADR.
Diversification Opportunities for China Construction and Bank of China Ltd ADR
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and Bank is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Ltd ADR 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 Bank of China Ltd ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Ltd ADR has no effect on the direction of China Construction i.e., China Construction and Bank of China Ltd ADR go up and down completely randomly.
Pair Corralation between China Construction and Bank of China Ltd ADR
Assuming the 90 days horizon China Construction Bank is expected to under-perform the Bank of China Ltd ADR. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Construction Bank is 1.1 times less risky than Bank of China Ltd ADR. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Bank of China is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,199 in Bank of China on August 27, 2024 and sell it today you would lose (26.00) from holding Bank of China or give up 2.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Construction Bank vs. Bank of China
Performance |
| Timeline |
| China Construction Bank |
| Bank of China Ltd ADR |
China Construction and Bank of China Ltd ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Bank of China Ltd ADR
The main advantage of trading using opposite China Construction and Bank of China Ltd ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Bank of China Ltd ADR 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 Bank of China Ltd ADR will offset losses from the drop in Bank of China Ltd ADR's long position.| China Construction vs. ANZ Group Holdings | China Construction vs. Agricultural Bank | China Construction vs. Industrial and Commercial | China Construction vs. Bank of America |
| Bank of China Ltd ADR vs. China Construction Bank | Bank of China Ltd ADR vs. Industrial and Commercial | Bank of China Ltd ADR vs. China Construction Bank | Bank of China Ltd ADR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |