Correlation Between Svenska Handelsbanken and China Construction
Can any of the company-specific risk be diversified away by investing in both Svenska Handelsbanken 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 Svenska Handelsbanken and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Svenska Handelsbanken PK and China Construction Bank, you can compare the effects of market volatilities on Svenska Handelsbanken 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 Svenska Handelsbanken with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Handelsbanken and China Construction.
Diversification Opportunities for Svenska Handelsbanken and China Construction
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Svenska and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken PK 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 Svenska Handelsbanken 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 Svenska Handelsbanken PK 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 Svenska Handelsbanken i.e., Svenska Handelsbanken and China Construction go up and down completely randomly.
Pair Corralation between Svenska Handelsbanken and China Construction
Assuming the 90 days horizon Svenska Handelsbanken is expected to generate 6.56 times less return on investment than China Construction. But when comparing it to its historical volatility, Svenska Handelsbanken PK is 4.16 times less risky than China Construction. It trades about 0.03 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 Against |
| Strength | Insignificant |
| Accuracy | 76.41% |
| Values | Daily Returns |
Svenska Handelsbanken PK vs. China Construction Bank
Performance |
| Timeline |
| Svenska Handelsbanken |
| China Construction Bank |
Svenska Handelsbanken and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Handelsbanken and China Construction
The main advantage of trading using opposite Svenska Handelsbanken and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Handelsbanken 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.| Svenska Handelsbanken vs. ANZ Group Holdings | Svenska Handelsbanken vs. Westpac Banking | Svenska Handelsbanken vs. National Australia Bank | Svenska Handelsbanken vs. Agricultural Bank |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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