Correlation Between China Resources and Bank of America
Can any of the company-specific risk be diversified away by investing in both China Resources and Bank of America 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 China Resources and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Bank of America, you can compare the effects of market volatilities on China Resources and Bank of America 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 China Resources with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Bank of America.
Diversification Opportunities for China Resources and Bank of America
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Bank is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and China Resources 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 China Resources Beer are associated (or correlated) with Bank of America. 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 America has no effect on the direction of China Resources i.e., China Resources and Bank of America go up and down completely randomly.
Pair Corralation between China Resources and Bank of America
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Bank of America. In addition to that, China Resources is 1.94 times more volatile than Bank of America. It trades about -0.01 of its total potential returns per unit of risk. Bank of America is currently generating about 0.06 per unit of volatility. If you would invest 2,870 in Bank of America on September 12, 2024 and sell it today you would earn a total of 1,515 from holding Bank of America or generate 52.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Bank of America
Performance |
| Timeline |
| China Resources Beer |
| Bank of America |
China Resources and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Bank of America
The main advantage of trading using opposite China Resources and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Bank of America 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 America will offset losses from the drop in Bank of America's long position.| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. SIVERS SEMICONDUCTORS AB | China Resources vs. NorAm Drilling AS |
| Bank of America vs. SCANSOURCE | Bank of America vs. Suntory Beverage Food | Bank of America vs. VIVA WINE GROUP | Bank of America vs. Tsingtao Brewery |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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