Correlation Between China Construction and Emergent Biosolutions

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

Diversification Opportunities for China Construction and Emergent Biosolutions

0.59

Correlation Coefficient

China Construction  Emergent Biosolutions

Very weak diversification

The 3 months correlation between China and Emergent is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions 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 Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of China Construction i.e., China Construction and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between China Construction and Emergent Biosolutions

Assuming the 90 days horizon China Construction Bank is expected to generate 0.64 times more return on investment than Emergent Biosolutions. However, China Construction Bank is 1.57 times less risky than Emergent Biosolutions. It trades about 0.11 of its potential returns per unit of risk. Emergent Biosolutions is currently generating about 0.06 per unit of risk. If you would invest  82.00  in China Construction Bank on May 4, 2025 and sell it today you would earn a total of  22.00  from holding China Construction Bank or generate 26.83% return on investment over 90 days.

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

China Construction Bank  vs.  Emergent Biosolutions

China Construction Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, China Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Emergent Biosolutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Construction and Emergent Biosolutions

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

The idea behind China Construction Bank and Emergent Biosolutions 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 CEOs Directory module to screen CEOs from public companies around the world.