Correlation Between China Railway and Skanska AB
Can any of the company-specific risk be diversified away by investing in both China Railway and Skanska AB 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 Railway and Skanska AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Group and Skanska AB ser, you can compare the effects of market volatilities on China Railway and Skanska AB 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 Railway with a short position of Skanska AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Skanska AB.
Diversification Opportunities for China Railway and Skanska AB
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Skanska is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Skanska AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skanska AB ser and China Railway 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 Railway Group are associated (or correlated) with Skanska AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skanska AB ser has no effect on the direction of China Railway i.e., China Railway and Skanska AB go up and down completely randomly.
Pair Corralation between China Railway and Skanska AB
Assuming the 90 days horizon China Railway Group is expected to under-perform the Skanska AB. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Railway Group is 1.49 times less risky than Skanska AB. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Skanska AB ser is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,161 in Skanska AB ser on November 5, 2024 and sell it today you would lose (13.00) from holding Skanska AB ser or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Railway Group vs. Skanska AB ser
Performance |
| Timeline |
| China Railway Group |
| Skanska AB ser |
China Railway and Skanska AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Railway and Skanska AB
The main advantage of trading using opposite China Railway and Skanska AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, Skanska AB 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 Skanska AB will offset losses from the drop in Skanska AB's long position.| China Railway vs. Arcadis NV | China Railway vs. VINCI SA | China Railway vs. Skanska AB ser | China Railway vs. Digital Locations |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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