Correlation Between China Construction and Laboratory

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

Diversification Opportunities for China Construction and Laboratory

-0.62

Correlation Coefficient

China Construction  Laboratory

Excellent diversification

The 3 months correlation between China and Laboratory is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory 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 Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of China Construction i.e., China Construction and Laboratory go up and down completely randomly.

Pair Corralation between China Construction and Laboratory

Assuming the 90 days horizon China Construction Bank is expected to generate 1.96 times more return on investment than Laboratory. However, China Construction is 1.96 times more volatile than Laboratory of. It trades about 0.09 of its potential returns per unit of risk. Laboratory of is currently generating about -0.14 per unit of risk. If you would invest  62.00  in China Construction Bank on February 4, 2024 and sell it today you would earn a total of  3.00  from holding China Construction Bank or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

China Construction Bank  vs.  Laboratory of

China Construction Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, China Construction may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with China Construction and Laboratory

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

The idea behind China Construction Bank and Laboratory of 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.