Correlation Between Guangzhou Zhujiang and China Construction

Can any of the company-specific risk be diversified away by investing in both Guangzhou Zhujiang 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 Guangzhou Zhujiang and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou Zhujiang Brewery and China Construction Bank, you can compare the effects of market volatilities on Guangzhou Zhujiang 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 Guangzhou Zhujiang with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Zhujiang and China Construction.

Diversification Opportunities for Guangzhou Zhujiang and China Construction

0.46

Correlation Coefficient

Guangzhou Zhujiang  China Construction

Very weak diversification

The 3 months correlation between Guangzhou and China is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Zhujiang Brewery 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 Guangzhou Zhujiang 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 Guangzhou Zhujiang Brewery 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 Guangzhou Zhujiang i.e., Guangzhou Zhujiang and China Construction go up and down completely randomly.

Pair Corralation between Guangzhou Zhujiang and China Construction

Assuming the 90 days trading horizon Guangzhou Zhujiang Brewery is expected to under-perform the China Construction. In addition to that, Guangzhou Zhujiang is 1.03 times more volatile than China Construction Bank. It trades about -0.03 of its total potential returns per unit of risk. China Construction Bank is currently generating about -0.01 per unit of volatility. If you would invest  859.00  in China Construction Bank on December 3, 2024 and sell it today you would lose (8.00) from holding China Construction Bank or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Guangzhou Zhujiang Brewery  vs.  China Construction Bank

Guangzhou Zhujiang

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangzhou Zhujiang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Construction Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Zhujiang and China Construction

The main advantage of trading using opposite Guangzhou Zhujiang and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Zhujiang 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.

The idea behind Guangzhou Zhujiang Brewery and China Construction Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..