Correlation Between NYSE Composite and China Construction
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and China Construction Bank, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and China Construction.
Diversification Opportunities for NYSE Composite and China Construction
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and China Construction go up and down completely randomly.
Pair Corralation between NYSE Composite and China Construction
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.1 times less return on investment than China Construction. But when comparing it to its historical volatility, NYSE Composite is 4.61 times less risky than China Construction. It trades about 0.21 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 75.00 in China Construction Bank on August 27, 2024 and sell it today you would earn a total of 4.00 from holding China Construction Bank or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. China Construction Bank
Performance |
| Timeline |
NYSE Composite and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
China Construction Bank
Pair trading matchups for China Construction
Pair Trading with NYSE Composite and China Construction
The main advantage of trading using opposite NYSE Composite and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| 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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