Correlation Between China Construction and PT Bank

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

Diversification Opportunities for China Construction and PT Bank

-0.47

Correlation Coefficient

China Construction  PT Bank

Very good diversification

The 3 months correlation between China and BZG2 is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Central has no effect on the direction of China Construction i.e., China Construction and PT Bank go up and down completely randomly.

Pair Corralation between China Construction and PT Bank

Assuming the 90 days horizon China Construction Bank is expected to generate 1.07 times more return on investment than PT Bank. However, China Construction is 1.07 times more volatile than PT Bank Central. It trades about 0.15 of its potential returns per unit of risk. PT Bank Central is currently generating about 0.0 per unit of risk. If you would invest  52.00  in China Construction Bank on October 25, 2024 and sell it today you would earn a total of  23.00  from holding China Construction Bank or generate 44.23% return on investment over 90 days.

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

China Construction Bank  vs.  PT Bank Central

China Construction Bank

Risk-Adjusted Performance

11 of 100

Good

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 nearly unsteady basic indicators, China Construction reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Construction and PT Bank

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

The idea behind China Construction Bank and PT Bank Central 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.