Correlation Between Industrial and BANK OCHINA
Can any of the company-specific risk be diversified away by investing in both Industrial and BANK OCHINA 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 BANK OCHINA 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 BANK OCHINA H, you can compare the effects of market volatilities on Industrial and BANK OCHINA 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 BANK OCHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and BANK OCHINA.
Diversification Opportunities for Industrial and BANK OCHINA
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Industrial and BANK is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and BANK OCHINA H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OCHINA H 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 BANK OCHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OCHINA H has no effect on the direction of Industrial i.e., Industrial and BANK OCHINA go up and down completely randomly.
Pair Corralation between Industrial and BANK OCHINA
Assuming the 90 days horizon Industrial is expected to generate 1.5 times less return on investment than BANK OCHINA. In addition to that, Industrial is 1.31 times more volatile than BANK OCHINA H. It trades about 0.05 of its total potential returns per unit of risk. BANK OCHINA H is currently generating about 0.09 per unit of volatility. If you would invest 767.00 in BANK OCHINA H on August 28, 2024 and sell it today you would earn a total of 303.00 from holding BANK OCHINA H or generate 39.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial and Commercial vs. BANK OCHINA H
Performance |
| Timeline |
| Industrial and Commercial |
| BANK OCHINA H |
Industrial and BANK OCHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial and BANK OCHINA
The main advantage of trading using opposite Industrial and BANK OCHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial position performs unexpectedly, BANK OCHINA 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 OCHINA will offset losses from the drop in BANK OCHINA's long position.| Industrial vs. Coor Service Management | Industrial vs. SIDETRADE EO 1 | Industrial vs. Globe Trade Centre | Industrial vs. FAST RETAIL ADR |
| BANK OCHINA vs. AGRICULTBK HADR25 YC | BANK OCHINA vs. The Toronto Dominion Bank | BANK OCHINA vs. Superior Plus Corp | BANK OCHINA vs. NMI Holdings |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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