Correlation Between EFG International and China Construction
Can any of the company-specific risk be diversified away by investing in both EFG International and China Construction 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 EFG International and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFG International AG and China Construction Bank, you can compare the effects of market volatilities on EFG International and China Construction 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 EFG International with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFG International and China Construction.
Diversification Opportunities for EFG International and China Construction
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EFG and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EFG International AG and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank and EFG International 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 EFG International AG are associated (or correlated) with China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of EFG International i.e., EFG International and China Construction go up and down completely randomly.
Pair Corralation between EFG International and China Construction
Assuming the 90 days horizon EFG International is expected to generate 2.52 times less return on investment than China Construction. But when comparing it to its historical volatility, EFG International AG is 3.4 times less risky than China Construction. It trades about 0.09 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 53.00 in China Construction Bank on September 23, 2024 and sell it today you would earn a total of 26.00 from holding China Construction Bank or generate 49.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 74.44% |
| Values | Daily Returns |
EFG International AG vs. China Construction Bank
Performance |
| Timeline |
| EFG International |
| China Construction Bank |
EFG International and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFG International and China Construction
The main advantage of trading using opposite EFG International and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFG International position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| EFG International vs. China Construction Bank | EFG International vs. National Australia Bank | EFG International vs. Svenska Handelsbanken AB | EFG International vs. Bank of America |
| China Construction vs. National Australia Bank | China Construction vs. Svenska Handelsbanken AB | 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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