Correlation Between CHINA EDUCATION and Granite Construction
Can any of the company-specific risk be diversified away by investing in both CHINA EDUCATION and Granite Construction 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 EDUCATION and Granite Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA EDUCATION GROUP and Granite Construction, you can compare the effects of market volatilities on CHINA EDUCATION and Granite Construction 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 EDUCATION with a short position of Granite Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and Granite Construction.
Diversification Opportunities for CHINA EDUCATION and Granite Construction
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CHINA and Granite is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and Granite Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Construction and CHINA EDUCATION 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 EDUCATION GROUP are associated (or correlated) with Granite Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Construction has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and Granite Construction go up and down completely randomly.
Pair Corralation between CHINA EDUCATION and Granite Construction
Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 2.69 times more return on investment than Granite Construction. However, CHINA EDUCATION is 2.69 times more volatile than Granite Construction. It trades about 0.06 of its potential returns per unit of risk. Granite Construction is currently generating about 0.14 per unit of risk. If you would invest 25.00 in CHINA EDUCATION GROUP on September 24, 2024 and sell it today you would earn a total of 16.00 from holding CHINA EDUCATION GROUP or generate 64.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CHINA EDUCATION GROUP vs. Granite Construction
Performance |
Timeline |
CHINA EDUCATION GROUP |
Granite Construction |
CHINA EDUCATION and Granite Construction Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CHINA EDUCATION and Granite Construction
The main advantage of trading using opposite CHINA EDUCATION and Granite Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION position performs unexpectedly, Granite Construction 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 Granite Construction will offset losses from the drop in Granite Construction's long position.CHINA EDUCATION vs. Salesforce | CHINA EDUCATION vs. USWE SPORTS AB | CHINA EDUCATION vs. Carsales | CHINA EDUCATION vs. Yuexiu Transport Infrastructure |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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