Correlation Between CHINA CONBANK and Assured Guaranty

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

By analyzing existing cross correlation between CHINA BANK ADR20 and Assured Guaranty, you can compare the effects of market volatilities on CHINA CONBANK and Assured Guaranty 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 CONBANK with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA CONBANK and Assured Guaranty.

Diversification Opportunities for CHINA CONBANK and Assured Guaranty

-0.84

Correlation Coefficient

CHINA CONBANK  Assured Guaranty

Pay attention - limited upside

The 3 months correlation between CHINA and Assured is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and CHINA CONBANK 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 BANK ADR20 are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of CHINA CONBANK i.e., CHINA CONBANK and Assured Guaranty go up and down completely randomly.

Pair Corralation between CHINA CONBANK and Assured Guaranty

Assuming the 90 days trading horizon CHINA BANK ADR20 is expected to generate 0.94 times more return on investment than Assured Guaranty. However, CHINA BANK ADR20 is 1.06 times less risky than Assured Guaranty. It trades about 0.17 of its potential returns per unit of risk. Assured Guaranty is currently generating about -0.03 per unit of risk. If you would invest  1,447  in CHINA BANK ADR20 on April 25, 2025 and sell it today you would earn a total of  313.00  from holding CHINA BANK ADR20 or generate 21.63% return on investment over 90 days.

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

CHINA BANK ADR20  vs.  Assured Guaranty

CHINA BANK ADR20

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA CONBANK reported solid returns over the last few months and may actually be approaching a breakup point.

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Assured Guaranty 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 CONBANK and Assured Guaranty

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

The idea behind CHINA BANK ADR20 and Assured Guaranty 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.