Correlation Between Bank of China and Aluminum
Can any of the company-specific risk be diversified away by investing in both Bank of China and Aluminum 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 Bank of China and Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of China and Aluminum of, you can compare the effects of market volatilities on Bank of China and Aluminum 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 Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and Aluminum.
Diversification Opportunities for Bank of China and Aluminum
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Aluminum is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Bank of China i.e., Bank of China and Aluminum go up and down completely randomly.
Pair Corralation between Bank of China and Aluminum
Assuming the 90 days horizon Bank of China is expected to generate 1.0 times more return on investment than Aluminum. However, Bank of China is 1.01 times less risky than Aluminum. It trades about 0.05 of its potential returns per unit of risk. Aluminum of is currently generating about -0.21 per unit of risk. If you would invest 49.00 in Bank of China on October 12, 2024 and sell it today you would earn a total of 1.00 from holding Bank of China or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. Aluminum of
Performance |
| Timeline |
| Bank of China |
| Aluminum |
Bank of China and Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China and Aluminum
The main advantage of trading using opposite Bank of China and Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China position performs unexpectedly, Aluminum 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 Aluminum will offset losses from the drop in Aluminum's long position.| Bank of China vs. China Construction Bank | Bank of China vs. Industrial and Commercial | Bank of China vs. Bank of China | Bank of China vs. Agricultural Bank of |
| Aluminum vs. Air China Limited | Aluminum vs. COSCO SHIPPING Holdings | Aluminum vs. Zijin Mining Group | Aluminum vs. Bank of China |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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