Correlation Between China Construction and ANZ Group

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

Diversification Opportunities for China Construction and ANZ Group

-0.03

Correlation Coefficient

China Construction  ANZ Group

Good diversification

The 3 months correlation between China and ANZ is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of China Construction i.e., China Construction and ANZ Group go up and down completely randomly.

Pair Corralation between China Construction and ANZ Group

Assuming the 90 days horizon China Construction Bank is expected to under-perform the ANZ Group. In addition to that, China Construction is 4.12 times more volatile than ANZ Group Holdings. It trades about -0.05 of its total potential returns per unit of risk. ANZ Group Holdings is currently generating about 0.23 per unit of volatility. If you would invest  2,020  in ANZ Group Holdings on August 28, 2024 and sell it today you would earn a total of  88.00  from holding ANZ Group Holdings or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

China Construction Bank  vs.  ANZ Group Holdings

China Construction Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, China Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ANZ Group Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, ANZ Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with China Construction and ANZ Group

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

The idea behind China Construction Bank and ANZ Group Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.