Correlation Between China Construction and Gaming

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

Diversification Opportunities for China Construction and Gaming

0.13

Correlation Coefficient

China Construction  Gaming

Average diversification

The 3 months correlation between China and Gaming is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Gaming and Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming and Leisure 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 Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming and Leisure has no effect on the direction of China Construction i.e., China Construction and Gaming go up and down completely randomly.

Pair Corralation between China Construction and Gaming

Assuming the 90 days horizon China Construction Bank is expected to generate 5.49 times more return on investment than Gaming. However, China Construction is 5.49 times more volatile than Gaming and Leisure. It trades about 0.28 of its potential returns per unit of risk. Gaming and Leisure is currently generating about -0.13 per unit of risk. If you would invest  57.00  in China Construction Bank on October 9, 2024 and sell it today you would earn a total of  19.00  from holding China Construction Bank or generate 33.33% return on investment over 90 days.

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

China Construction Bank  vs.  Gaming and Leisure

China Construction Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Gaming and Leisure

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gaming and Leisure are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaming is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Construction and Gaming

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

The idea behind China Construction Bank and Gaming and Leisure 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.