Correlation Between China Construction and Jilin Jlu

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

Diversification Opportunities for China Construction and Jilin Jlu

-0.29

Correlation Coefficient

China Construction  Jilin Jlu

Very good diversification

The 3 months correlation between China and Jilin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Jilin Jlu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Jlu Communication 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 Jilin Jlu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Jlu Communication has no effect on the direction of China Construction i.e., China Construction and Jilin Jlu go up and down completely randomly.

Pair Corralation between China Construction and Jilin Jlu

Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.48 times more return on investment than Jilin Jlu. However, China Construction Bank is 2.06 times less risky than Jilin Jlu. It trades about -0.13 of its potential returns per unit of risk. Jilin Jlu Communication is currently generating about -0.13 per unit of risk. If you would invest  862.00  in China Construction Bank on October 22, 2024 and sell it today you would lose (33.00) from holding China Construction Bank or give up 3.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

China Construction Bank  vs.  Jilin Jlu Communication

China Construction Bank

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 2 (%) 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.

Jilin Jlu Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jilin Jlu Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jilin Jlu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Construction and Jilin Jlu

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

The idea behind China Construction Bank and Jilin Jlu Communication 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.