Correlation Between Bank of China and Weichai Heavy
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By analyzing existing cross correlation between Bank of China and Weichai Heavy Machinery, you can compare the effects of market volatilities on Bank of China and Weichai Heavy 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 Bank of China with a short position of Weichai Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and Weichai Heavy.
Diversification Opportunities for Bank of China and Weichai Heavy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Weichai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Weichai Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Heavy Machinery and Bank of China 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 Bank of China are associated (or correlated) with Weichai Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Heavy Machinery has no effect on the direction of Bank of China i.e., Bank of China and Weichai Heavy go up and down completely randomly.
Pair Corralation between Bank of China and Weichai Heavy
Assuming the 90 days trading horizon Bank of China is expected to generate 1.38 times less return on investment than Weichai Heavy. But when comparing it to its historical volatility, Bank of China is 2.11 times less risky than Weichai Heavy. It trades about 0.1 of its potential returns per unit of risk. Weichai Heavy Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 923.00 in Weichai Heavy Machinery on September 28, 2024 and sell it today you would earn a total of 929.00 from holding Weichai Heavy Machinery or generate 100.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. Weichai Heavy Machinery
Performance |
| Timeline |
| Bank of China |
| Weichai Heavy Machinery |
Bank of China and Weichai Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China and Weichai Heavy
The main advantage of trading using opposite Bank of China and Weichai Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China position performs unexpectedly, Weichai Heavy 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 Weichai Heavy will offset losses from the drop in Weichai Heavy's long position.| Bank of China vs. Industrial and Commercial | Bank of China vs. Kweichow Moutai Co | Bank of China vs. Agricultural Bank of | Bank of China vs. China Mobile Limited |
| Weichai Heavy vs. Bank of China | Weichai Heavy vs. Kweichow Moutai Co | Weichai Heavy vs. PetroChina Co Ltd | Weichai Heavy vs. Bank of Communications |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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