Correlation Between Industrial and CHINA BANK
Can any of the company-specific risk be diversified away by investing in both Industrial and CHINA BANK 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 Industrial and CHINA BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial and Commercial and CHINA BANK ADR20, you can compare the effects of market volatilities on Industrial and CHINA BANK 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 Industrial with a short position of CHINA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and CHINA BANK.
Diversification Opportunities for Industrial and CHINA BANK
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrial and CHINA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and CHINA BANK ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA BANK ADR20 and Industrial 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 Industrial and Commercial are associated (or correlated) with CHINA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA BANK ADR20 has no effect on the direction of Industrial i.e., Industrial and CHINA BANK go up and down completely randomly.
Pair Corralation between Industrial and CHINA BANK
Assuming the 90 days horizon Industrial is expected to generate 1.3 times less return on investment than CHINA BANK. In addition to that, Industrial is 1.37 times more volatile than CHINA BANK ADR20. It trades about 0.03 of its total potential returns per unit of risk. CHINA BANK ADR20 is currently generating about 0.06 per unit of volatility. If you would invest 954.00 in CHINA BANK ADR20 on August 24, 2024 and sell it today you would earn a total of 456.00 from holding CHINA BANK ADR20 or generate 47.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.76% |
| Values | Daily Returns |
Industrial and Commercial vs. CHINA BANK ADR20
Performance |
| Timeline |
| Industrial and Commercial |
| CHINA BANK ADR20 |
Industrial and CHINA BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial and CHINA BANK
The main advantage of trading using opposite Industrial and CHINA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, CHINA BANK 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 CHINA BANK will offset losses from the drop in CHINA BANK's long position.| Industrial vs. HK Electric Investments | Industrial vs. Postal Savings Bank | Industrial vs. Chuangs China Investments | Industrial vs. TITAN MACHINERY |
| CHINA BANK vs. GRIFFIN MINING LTD | CHINA BANK vs. Zijin Mining Group | CHINA BANK vs. Harmony Gold Mining | CHINA BANK vs. Molson Coors Beverage |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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