Correlation Between Bank of China Ltd ADR and Bank of Communications Co
Can any of the company-specific risk be diversified away by investing in both Bank of China Ltd ADR and Bank of Communications Co 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 Ltd ADR and Bank of Communications Co 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 Bank of Communications, you can compare the effects of market volatilities on Bank of China Ltd ADR and Bank of Communications Co 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 Ltd ADR with a short position of Bank of Communications Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Ltd ADR and Bank of Communications Co.
Diversification Opportunities for Bank of China Ltd ADR and Bank of Communications Co
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Bank is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Bank of Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Communications Co and Bank of China Ltd ADR 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 Bank of Communications Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Communications Co has no effect on the direction of Bank of China Ltd ADR i.e., Bank of China Ltd ADR and Bank of Communications Co go up and down completely randomly.
Pair Corralation between Bank of China Ltd ADR and Bank of Communications Co
Assuming the 90 days horizon Bank of China Ltd ADR is expected to generate 3.3 times less return on investment than Bank of Communications Co. But when comparing it to its historical volatility, Bank of China is 4.45 times less risky than Bank of Communications Co. It trades about 0.07 of its potential returns per unit of risk. Bank of Communications is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,209 in Bank of Communications on September 3, 2024 and sell it today you would earn a total of 600.00 from holding Bank of Communications or generate 49.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 77.17% |
| Values | Daily Returns |
Bank of China vs. Bank of Communications
Performance |
| Timeline |
| Bank of China Ltd ADR |
| Bank of Communications Co |
Bank of China Ltd ADR and Bank of Communications Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China Ltd ADR and Bank of Communications Co
The main advantage of trading using opposite Bank of China Ltd ADR and Bank of Communications Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Ltd ADR position performs unexpectedly, Bank of Communications Co 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 Bank of Communications Co will offset losses from the drop in Bank of Communications Co's long position.| Bank of China Ltd ADR vs. China Construction Bank | Bank of China Ltd ADR vs. Industrial and Commercial | Bank of China Ltd ADR vs. China Construction Bank | Bank of China Ltd ADR vs. Bank of America |
| Bank of Communications Co vs. Bank of China | Bank of Communications Co vs. Bank of America | Bank of Communications Co vs. ABN AMRO Bank | Bank of Communications Co vs. Banco Bilbao Viscaya |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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