Correlation Between National Australia and China Construction
Can any of the company-specific risk be diversified away by investing in both National Australia 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 National Australia and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Australia Bank and China Construction Bank, you can compare the effects of market volatilities on National Australia 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 National Australia with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and China Construction.
Diversification Opportunities for National Australia and China Construction
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank 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 National Australia 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 National Australia Bank 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 National Australia i.e., National Australia and China Construction go up and down completely randomly.
Pair Corralation between National Australia and China Construction
Assuming the 90 days horizon National Australia is expected to generate 1.29 times less return on investment than China Construction. But when comparing it to its historical volatility, National Australia Bank is 1.17 times less risky than China Construction. It trades about 0.04 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 59.00 in China Construction Bank on August 23, 2024 and sell it today you would earn a total of 15.00 from holding China Construction Bank or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.39% |
| Values | Daily Returns |
National Australia Bank vs. China Construction Bank
Performance |
| Timeline |
| National Australia Bank |
| China Construction Bank |
National Australia and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and China Construction
The main advantage of trading using opposite National Australia and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia 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.| National Australia vs. National Australia Bank | National Australia vs. China Construction Bank | National Australia vs. Bank of America | National Australia vs. ANZ Group Holdings |
| China Construction vs. Svenska Handelsbanken PK | China Construction vs. ANZ Group Holdings | China Construction vs. Westpac Banking | China Construction vs. National Australia Bank |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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