Correlation Between Banco Bilbao and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both Banco Bilbao and Bank of China Limited 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 Banco Bilbao and Bank of China Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Bilbao Vizcaya and Bank of China, you can compare the effects of market volatilities on Banco Bilbao and Bank of China Limited 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 Banco Bilbao with a short position of Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and Bank of China Limited.
Diversification Opportunities for Banco Bilbao and Bank of China Limited
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Banco and Bank is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited and Banco Bilbao 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 Banco Bilbao Vizcaya are associated (or correlated) with Bank of China Limited. 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 China Limited has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Bank of China Limited go up and down completely randomly.
Pair Corralation between Banco Bilbao and Bank of China Limited
Assuming the 90 days trading horizon Banco Bilbao Vizcaya is expected to under-perform the Bank of China Limited. In addition to that, Banco Bilbao is 1.13 times more volatile than Bank of China. It trades about -0.03 of its total potential returns per unit of risk. Bank of China is currently generating about 0.05 per unit of volatility. If you would invest 41.00 in Bank of China on September 2, 2024 and sell it today you would earn a total of 2.00 from holding Bank of China or generate 4.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Bilbao Vizcaya vs. Bank of China
Performance |
| Timeline |
| Banco Bilbao Vizcaya |
| Bank of China Limited |
Banco Bilbao and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bilbao and Bank of China Limited
The main advantage of trading using opposite Banco Bilbao and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao position performs unexpectedly, Bank of China Limited 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 China Limited will offset losses from the drop in Bank of China Limited's long position.| Banco Bilbao vs. Bank of China | Banco Bilbao vs. Superior Plus Corp | Banco Bilbao vs. NMI Holdings | Banco Bilbao vs. Origin Agritech |
| Bank of China Limited vs. Superior Plus Corp | Bank of China Limited vs. NMI Holdings | Bank of China Limited vs. Origin Agritech | Bank of China Limited vs. SIVERS SEMICONDUCTORS AB |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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