Correlation Between China Construction and Zhengzhou Coal
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By analyzing existing cross correlation between China Construction Bank and Zhengzhou Coal Mining, you can compare the effects of market volatilities on China Construction and Zhengzhou Coal 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 Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Zhengzhou Coal.
Diversification Opportunities for China Construction and Zhengzhou Coal
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Zhengzhou is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining 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 Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of China Construction i.e., China Construction and Zhengzhou Coal go up and down completely randomly.
Pair Corralation between China Construction and Zhengzhou Coal
Assuming the 90 days trading horizon China Construction Bank is expected to generate 0.78 times more return on investment than Zhengzhou Coal. However, China Construction Bank is 1.28 times less risky than Zhengzhou Coal. It trades about 0.37 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.19 per unit of risk. If you would invest 788.00 in China Construction Bank on September 24, 2024 and sell it today you would earn a total of 60.00 from holding China Construction Bank or generate 7.61% 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. Zhengzhou Coal Mining
Performance |
Timeline |
China Construction Bank |
Zhengzhou Coal Mining |
China Construction and Zhengzhou Coal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Construction and Zhengzhou Coal
The main advantage of trading using opposite China Construction and Zhengzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Zhengzhou Coal 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 Zhengzhou Coal will offset losses from the drop in Zhengzhou Coal's long position.The idea behind China Construction Bank and Zhengzhou Coal Mining 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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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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