Correlation Between China Construction and Optivision Technology

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

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

Diversification Opportunities for China Construction and Optivision Technology

0.34

Correlation Coefficient

China Construction  Optivision Technology

Weak diversification

The 3 months correlation between China and Optivision is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Optivision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optivision Technology and China Construction 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 China Construction Bank are associated (or correlated) with Optivision Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optivision Technology has no effect on the direction of China Construction i.e., China Construction and Optivision Technology go up and down completely randomly.

Pair Corralation between China Construction and Optivision Technology

Assuming the 90 days trading horizon China Construction is expected to generate 108.83 times less return on investment than Optivision Technology. But when comparing it to its historical volatility, China Construction Bank is 2.51 times less risky than Optivision Technology. It trades about 0.0 of its potential returns per unit of risk. Optivision Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,040  in Optivision Technology on December 27, 2024 and sell it today you would earn a total of  325.00  from holding Optivision Technology or generate 10.69% return on investment over 90 days.

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

China Construction Bank  vs.  Optivision Technology

China Construction Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Construction Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, China Construction is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Optivision Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optivision Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Optivision Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Construction and Optivision Technology

The main advantage of trading using opposite China Construction and Optivision Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Optivision Technology 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 Optivision Technology will offset losses from the drop in Optivision Technology's long position.

The idea behind China Construction Bank and Optivision Technology 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.