Correlation Between China Construction and Royal Bank
Can any of the company-specific risk be diversified away by investing in both China Construction and Royal 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 Royal 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 Royal Bank of, you can compare the effects of market volatilities on China Construction and Royal 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 Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Royal Bank.
Diversification Opportunities for China Construction and Royal Bank
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Royal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of China Construction i.e., China Construction and Royal Bank go up and down completely randomly.
Pair Corralation between China Construction and Royal Bank
Assuming the 90 days horizon China Construction Bank is expected to generate 1.85 times more return on investment than Royal Bank. However, China Construction is 1.85 times more volatile than Royal Bank of. It trades about 0.07 of its potential returns per unit of risk. Royal Bank of is currently generating about 0.11 per unit of risk. If you would invest 60.00 in China Construction Bank on September 24, 2024 and sell it today you would earn a total of 18.00 from holding China Construction Bank or generate 30.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
China Construction Bank vs. Royal Bank of
Performance |
Timeline |
China Construction Bank |
Royal Bank |
China Construction and Royal Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Construction and Royal Bank
The main advantage of trading using opposite China Construction and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Royal 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 Royal Bank will offset losses from the drop in Royal Bank's long position.China Construction vs. JPMorgan Chase Co | China Construction vs. Bank of America | China Construction vs. Wells Fargo | China Construction vs. HSBC Holdings plc |
Royal Bank vs. JPMorgan Chase Co | Royal Bank vs. Bank of America | Royal Bank vs. Wells Fargo | Royal Bank vs. China Construction Bank |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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