Correlation Between China Construction and Lootom Telcovideo

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

Diversification Opportunities for China Construction and Lootom Telcovideo

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and Lootom is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Lootom Telcovideo Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lootom Telcovideo Network 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 Lootom Telcovideo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lootom Telcovideo Network has no effect on the direction of China Construction i.e., China Construction and Lootom Telcovideo go up and down completely randomly.

Pair Corralation between China Construction and Lootom Telcovideo

Assuming the 90 days trading horizon China Construction is expected to generate 2.87 times less return on investment than Lootom Telcovideo. But when comparing it to its historical volatility, China Construction Bank is 2.06 times less risky than Lootom Telcovideo. It trades about 0.14 of its potential returns per unit of risk. Lootom Telcovideo Network is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  583.00  in Lootom Telcovideo Network on September 5, 2024 and sell it today you would earn a total of  251.00  from holding Lootom Telcovideo Network or generate 43.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

China Construction Bank  vs.  Lootom Telcovideo Network

 Performance 
       Timeline  
China Construction Bank 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Construction sustained solid returns over the last few months and may actually be approaching a breakup point.
Lootom Telcovideo Network 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lootom Telcovideo Network are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lootom Telcovideo sustained solid returns over the last few months and may actually be approaching a breakup point.

China Construction and Lootom Telcovideo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Construction and Lootom Telcovideo

The main advantage of trading using opposite China Construction and Lootom Telcovideo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Lootom Telcovideo 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 Lootom Telcovideo will offset losses from the drop in Lootom Telcovideo's long position.
The idea behind China Construction Bank and Lootom Telcovideo Network 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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