Correlation Between Travis Perkins and China State
Can any of the company-specific risk be diversified away by investing in both Travis Perkins and China State 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 Travis Perkins and China State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Travis Perkins PLC and China State Construction, you can compare the effects of market volatilities on Travis Perkins and China State 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 Travis Perkins with a short position of China State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travis Perkins and China State.
Diversification Opportunities for Travis Perkins and China State
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Travis and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Travis Perkins PLC and China State Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China State Construction and Travis Perkins 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 Travis Perkins PLC are associated (or correlated) with China State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China State Construction has no effect on the direction of Travis Perkins i.e., Travis Perkins and China State go up and down completely randomly.
Pair Corralation between Travis Perkins and China State
Assuming the 90 days horizon Travis Perkins is expected to generate 37.36 times less return on investment than China State. But when comparing it to its historical volatility, Travis Perkins PLC is 2.35 times less risky than China State. It trades about 0.0 of its potential returns per unit of risk. China State Construction is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 56.00 in China State Construction on September 12, 2024 and sell it today you would earn a total of 49.00 from holding China State Construction or generate 87.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 83.75% |
| Values | Daily Returns |
Travis Perkins PLC vs. China State Construction
Performance |
| Timeline |
| Travis Perkins PLC |
| China State Construction |
Travis Perkins and China State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Travis Perkins and China State
The main advantage of trading using opposite Travis Perkins and China State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travis Perkins position performs unexpectedly, China State 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 State will offset losses from the drop in China State's long position.| Travis Perkins vs. Atlas Engineered Products | Travis Perkins vs. Antelope Enterprise Holdings | Travis Perkins vs. Intelligent Living Application | Travis Perkins vs. Armstrong World Industries |
| China State vs. Arcadis NV | China State vs. China Railway Group | China State vs. Skanska AB ser | China State vs. Digital Locations |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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