Correlation Between CHINA STATE and Tokyu Construction

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

By analyzing existing cross correlation between CHINA STATE STRU and Tokyu Construction Co, you can compare the effects of market volatilities on CHINA STATE and Tokyu 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 STATE with a short position of Tokyu Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA STATE and Tokyu Construction.

Diversification Opportunities for CHINA STATE and Tokyu Construction

-0.44

Correlation Coefficient

CHINA STATE  Tokyu Construction

Very good diversification

The 3 months correlation between CHINA and Tokyu is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CHINA STATE STRU and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction and CHINA STATE 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 STATE STRU are associated (or correlated) with Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of CHINA STATE i.e., CHINA STATE and Tokyu Construction go up and down completely randomly.

Pair Corralation between CHINA STATE and Tokyu Construction

Assuming the 90 days trading horizon CHINA STATE STRU is expected to under-perform the Tokyu Construction. But the stock apears to be less risky and, when comparing its historical volatility, CHINA STATE STRU is 1.97 times less risky than Tokyu Construction. The stock trades about -0.11 of its potential returns per unit of risk. The Tokyu Construction Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Tokyu Construction Co on September 30, 2024 and sell it today you would earn a total of  26.00  from holding Tokyu Construction Co or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

CHINA STATE STRU  vs.  Tokyu Construction Co

CHINA STATE STRU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA STATE STRU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CHINA STATE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tokyu Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyu Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokyu Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA STATE and Tokyu Construction

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

The idea behind CHINA STATE STRU and Tokyu Construction Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.