Correlation Between Bank of China Ltd ADR and Banco De
Can any of the company-specific risk be diversified away by investing in both Bank of China Ltd ADR and Banco De 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 Banco De 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 Banco de Sabadell, you can compare the effects of market volatilities on Bank of China Ltd ADR and Banco De 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 Banco De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Ltd ADR and Banco De.
Diversification Opportunities for Bank of China Ltd ADR and Banco De
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Banco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of Bank of China Ltd ADR i.e., Bank of China Ltd ADR and Banco De go up and down completely randomly.
Pair Corralation between Bank of China Ltd ADR and Banco De
Assuming the 90 days horizon Bank of China is expected to generate 1.3 times more return on investment than Banco De. However, Bank of China Ltd ADR is 1.3 times more volatile than Banco de Sabadell. It trades about -0.08 of its potential returns per unit of risk. Banco de Sabadell is currently generating about -0.16 per unit of risk. If you would invest 1,199 in Bank of China on August 28, 2024 and sell it today you would lose (44.00) from holding Bank of China or give up 3.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. Banco de Sabadell
Performance |
| Timeline |
| Bank of China Ltd ADR |
| Banco de Sabadell |
Bank of China Ltd ADR and Banco De Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China Ltd ADR and Banco De
The main advantage of trading using opposite Bank of China Ltd ADR and Banco De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Ltd ADR position performs unexpectedly, Banco De 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 Banco De will offset losses from the drop in Banco De'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 |
| Banco De vs. Banco Bilbao Vizcaya | Banco De vs. ABN AMRO Bank | Banco De vs. Bank of America | Banco De 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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