Correlation Between Intel and China Construction
Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and China Construction Bank, you can compare the effects of market volatilities on Intel 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 Intel with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and China Construction.
Diversification Opportunities for Intel and China Construction
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intel and China is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Intel 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 Intel 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 Intel 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 Intel i.e., Intel and China Construction go up and down completely randomly.
Pair Corralation between Intel and China Construction
Given the investment horizon of 90 days Intel is expected to generate 23.9 times less return on investment than China Construction. But when comparing it to its historical volatility, Intel is 2.79 times less risky than China Construction. It trades about 0.01 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 51.00 in China Construction Bank on August 27, 2024 and sell it today you would earn a total of 28.00 from holding China Construction Bank or generate 54.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.41% |
| Values | Daily Returns |
Intel vs. China Construction Bank
Performance |
| Timeline |
| Intel |
| China Construction Bank |
Intel and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and China Construction
The main advantage of trading using opposite Intel and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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.| Intel vs. NVIDIA | Intel vs. Taiwan Semiconductor Manufacturing | Intel vs. Marvell Technology Group | Intel vs. Micron Technology |
| China Construction vs. Svenska Handelsbanken PK | China Construction vs. Industrial and Commercial | 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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