Correlation Between FARM 51 and BANK OF CHINA
Can any of the company-specific risk be diversified away by investing in both FARM 51 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 FARM 51 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 FARM 51 GROUP and BANK OF CHINA, you can compare the effects of market volatilities on FARM 51 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 FARM 51 with a short position of BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and BANK OF CHINA.
Diversification Opportunities for FARM 51 and BANK OF CHINA
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between FARM and BANK is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP 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 FARM 51 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 FARM 51 GROUP 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 FARM 51 i.e., FARM 51 and BANK OF CHINA go up and down completely randomly.
Pair Corralation between FARM 51 and BANK OF CHINA
Assuming the 90 days horizon FARM 51 is expected to generate 10.08 times less return on investment than BANK OF CHINA. But when comparing it to its historical volatility, FARM 51 GROUP is 3.7 times less risky than BANK OF CHINA. It trades about 0.1 of its potential returns per unit of risk. BANK OF CHINA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 35.00 in BANK OF CHINA on November 1, 2024 and sell it today you would earn a total of 16.00 from holding BANK OF CHINA or generate 45.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
FARM 51 GROUP vs. BANK OF CHINA
Performance |
| Timeline |
| FARM 51 GROUP |
| BANK OF CHINA |
FARM 51 and BANK OF CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARM 51 and BANK OF CHINA
The main advantage of trading using opposite FARM 51 and BANK OF CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 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.| FARM 51 vs. Eagle Materials | FARM 51 vs. The Yokohama Rubber | FARM 51 vs. Altair Engineering | FARM 51 vs. Delta Air Lines |
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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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