Correlation Between China Railway and Skanska AB

Can any of the company-specific risk be diversified away by investing in both China Railway and Skanska AB 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 Railway and Skanska AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Railway Group and Skanska AB ser, you can compare the effects of market volatilities on China Railway and Skanska AB 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 Railway with a short position of Skanska AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Skanska AB.

Diversification Opportunities for China Railway and Skanska AB

0.31

Correlation Coefficient

China Railway  Skanska AB

Weak diversification

The 3 months correlation between China and Skanska is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Skanska AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skanska AB ser and China Railway 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 Railway Group are associated (or correlated) with Skanska AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skanska AB ser has no effect on the direction of China Railway i.e., China Railway and Skanska AB go up and down completely randomly.

Pair Corralation between China Railway and Skanska AB

Assuming the 90 days horizon China Railway Group is expected to generate 4.09 times more return on investment than Skanska AB. However, China Railway is 4.09 times more volatile than Skanska AB ser. It trades about 0.05 of its potential returns per unit of risk. Skanska AB ser is currently generating about 0.04 per unit of risk. If you would invest  46.00  in China Railway Group on September 4, 2024 and sell it today you would earn a total of  4.00  from holding China Railway Group or generate 8.7% return on investment over 90 days.

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

China Railway Group  vs.  Skanska AB ser

China Railway Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Skanska AB ser

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skanska AB ser are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Skanska AB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Railway and Skanska AB

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

The idea behind China Railway Group and Skanska AB ser 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.