Correlation Between China Construction and CYIOS

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

Diversification Opportunities for China Construction and CYIOS

-0.65

Correlation Coefficient

China Construction  CYIOS

Excellent diversification

The 3 months correlation between China and CYIOS is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and CYIOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CYIOS 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 CYIOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CYIOS has no effect on the direction of China Construction i.e., China Construction and CYIOS go up and down completely randomly.

Pair Corralation between China Construction and CYIOS

Assuming the 90 days horizon China Construction Bank is expected to generate 0.52 times more return on investment than CYIOS. However, China Construction Bank is 1.92 times less risky than CYIOS. It trades about 0.06 of its potential returns per unit of risk. CYIOS is currently generating about -0.06 per unit of risk. If you would invest  72.00  in China Construction Bank on September 4, 2024 and sell it today you would earn a total of  8.00  from holding China Construction Bank or generate 11.11% return on investment over 90 days.

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

China Construction Bank  vs.  CYIOS

China Construction Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, China Construction reported solid returns over the last few months and may actually be approaching a breakup point.

CYIOS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CYIOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with China Construction and CYIOS

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

The idea behind China Construction Bank and CYIOS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.