Correlation Between China Construction and Panda Financial

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

Diversification Opportunities for China Construction and Panda Financial

0.01

Correlation Coefficient

China Construction  Panda Financial

Significant diversification

The 3 months correlation between China and Panda is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Panda Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Financial Holding 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 Panda Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Financial Holding has no effect on the direction of China Construction i.e., China Construction and Panda Financial go up and down completely randomly.

Pair Corralation between China Construction and Panda Financial

Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.51 times more return on investment than Panda Financial. However, China Construction Bank is 1.98 times less risky than Panda Financial. It trades about -0.04 of its potential returns per unit of risk. Panda Financial Holding is currently generating about -0.17 per unit of risk. If you would invest  880.00  in China Construction Bank on December 29, 2024 and sell it today you would lose (28.00) from holding China Construction Bank or give up 3.18% of portfolio value over 90 days.

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

China Construction Bank  vs.  Panda Financial Holding

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.

Panda Financial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Panda Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Construction and Panda Financial

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

The idea behind China Construction Bank and Panda Financial Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.