Correlation Between Construction and Post

Can any of the company-specific risk be diversified away by investing in both Construction and Post 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 Construction and Post into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Construction And Investment and Post and Telecommunications, you can compare the effects of market volatilities on Construction and Post 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 Construction with a short position of Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction and Post.

Diversification Opportunities for Construction and Post

0.9

Correlation Coefficient

Construction  Post

Almost no diversification

The 3 months correlation between Construction and Post is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Construction And Investment and Post and Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post and Telecommuni and 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 Construction And Investment are associated (or correlated) with Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post and Telecommuni has no effect on the direction of Construction i.e., Construction and Post go up and down completely randomly.

Pair Corralation between Construction and Post

Assuming the 90 days trading horizon Construction And Investment is expected to generate 0.82 times more return on investment than Post. However, Construction And Investment is 1.22 times less risky than Post. It trades about 0.15 of its potential returns per unit of risk. Post and Telecommunications is currently generating about 0.1 per unit of risk. If you would invest  3,880,000  in Construction And Investment on December 5, 2024 and sell it today you would earn a total of  750,000  from holding Construction And Investment or generate 19.33% return on investment over 90 days.

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

Construction And Investment  vs.  Post and Telecommunications

Construction And Inv

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Construction And Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Post and Telecommuni

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Post and Telecommunications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Post displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Construction and Post

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

The idea behind Construction And Investment and Post and Telecommunications 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.