Correlation Between BII Railway and Bank of China
Can any of the company-specific risk be diversified away by investing in both BII Railway and Bank of China 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 BII Railway and Bank of China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Bank of China, you can compare the effects of market volatilities on BII Railway and Bank of China 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 BII Railway with a short position of Bank of China. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Bank of China.
Diversification Opportunities for BII Railway and Bank of China
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BII and Bank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China and BII Railway 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 BII Railway Transportation are associated (or correlated) with Bank of China. 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 has no effect on the direction of BII Railway i.e., BII Railway and Bank of China go up and down completely randomly.
Pair Corralation between BII Railway and Bank of China
Assuming the 90 days horizon BII Railway Transportation is expected to under-perform the Bank of China. But the stock apears to be less risky and, when comparing its historical volatility, BII Railway Transportation is 3.41 times less risky than Bank of China. The stock trades about -0.03 of its potential returns per unit of risk. The Bank of China is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Bank of China on September 3, 2024 and sell it today you would earn a total of 25.00 from holding Bank of China or generate 138.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Bank of China
Performance |
| Timeline |
| BII Railway Transpor |
| Bank of China |
BII Railway and Bank of China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Bank of China
The main advantage of trading using opposite BII Railway and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, Bank of China 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 will offset losses from the drop in Bank of China's long position.| BII Railway vs. Entravision Communications | BII Railway vs. Consolidated Communications Holdings | BII Railway vs. Chunghwa Telecom Co | BII Railway vs. Verizon Communications |
| Bank of China vs. Perdoceo Education | Bank of China vs. Strategic Education | Bank of China vs. ONWARD MEDICAL BV | Bank of China vs. CompuGroup Medical SE |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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