Correlation Between China Construction and Markor International

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

Diversification Opportunities for China Construction and Markor International

0.46

Correlation Coefficient

China Construction  Markor International

Very weak diversification

The 3 months correlation between China and Markor is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Markor International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markor International Home 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 Markor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markor International Home has no effect on the direction of China Construction i.e., China Construction and Markor International go up and down completely randomly.

Pair Corralation between China Construction and Markor International

Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.3 times more return on investment than Markor International. However, China Construction Bank is 3.39 times less risky than Markor International. It trades about 0.14 of its potential returns per unit of risk. Markor International Home is currently generating about 0.03 per unit of risk. If you would invest  793.00  in China Construction Bank on September 28, 2024 and sell it today you would earn a total of  90.00  from holding China Construction Bank or generate 11.35% return on investment over 90 days.

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

China Construction Bank  vs.  Markor International Home

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 somewhat weak basic indicators, China Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Markor International Home

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Markor International Home are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Markor International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Construction and Markor International

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

The idea behind China Construction Bank and Markor International Home 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .