Correlation Between Construction and Book
Can any of the company-specific risk be diversified away by investing in both Construction and Book 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 Construction and Book into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Construction And Investment and Book And Educational, you can compare the effects of market volatilities on Construction and Book 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 Construction with a short position of Book. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction and Book.
Diversification Opportunities for Construction and Book
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Construction and Book is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Construction And Investment and Book And Educational in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Book And Educational and 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 Construction And Investment are associated (or correlated) with Book. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Book And Educational has no effect on the direction of Construction i.e., Construction and Book go up and down completely randomly.
Pair Corralation between Construction and Book
Assuming the 90 days trading horizon Construction And Investment is expected to under-perform the Book. But the stock apears to be less risky and, when comparing its historical volatility, Construction And Investment is 1.03 times less risky than Book. The stock trades about -0.27 of its potential returns per unit of risk. The Book And Educational is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 1,700,000 in Book And Educational on November 3, 2024 and sell it today you would earn a total of 50,000 from holding Book And Educational or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 22.22% |
| Values | Daily Returns |
Construction And Investment vs. Book And Educational
Performance |
| Timeline |
| Construction And Inv |
| Book And Educational |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Construction and Book Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Construction and Book
The main advantage of trading using opposite Construction and Book positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Construction position performs unexpectedly, Book 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 Book will offset losses from the drop in Book's long position.| Construction vs. Tien Giang Investment | Construction vs. Hanoi Beer Alcohol | Construction vs. Dinhvu Port Investment | Construction vs. Tin Nghia Industrial |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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