Correlation Between China Construction and Citic Offshore

Can any of the company-specific risk be diversified away by investing in both China Construction and Citic Offshore 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 Citic Offshore 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 Citic Offshore Helicopter, you can compare the effects of market volatilities on China Construction and Citic Offshore 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 Citic Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Citic Offshore.

Diversification Opportunities for China Construction and Citic Offshore

0.56

Correlation Coefficient

China Construction  Citic Offshore

Very weak diversification

The 3 months correlation between China and Citic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Citic Offshore Helicopter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Offshore Helicopter 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 Citic Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Offshore Helicopter has no effect on the direction of China Construction i.e., China Construction and Citic Offshore go up and down completely randomly.

Pair Corralation between China Construction and Citic Offshore

Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.42 times more return on investment than Citic Offshore. However, China Construction Bank is 2.36 times less risky than Citic Offshore. It trades about -0.02 of its potential returns per unit of risk. Citic Offshore Helicopter is currently generating about -0.06 per unit of risk. If you would invest  883.00  in China Construction Bank on December 26, 2024 and sell it today you would lose (18.00) from holding China Construction Bank or give up 2.04% of portfolio value over 90 days.

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

China Construction Bank  vs.  Citic Offshore Helicopter

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. 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.

Citic Offshore Helicopter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citic Offshore Helicopter has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Construction and Citic Offshore

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

The idea behind China Construction Bank and Citic Offshore Helicopter 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.