Correlation Between New World and Bank of East Asia Limited
Can any of the company-specific risk be diversified away by investing in both New World and Bank of East Asia Limited 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 New World and Bank of East Asia Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Development and Bank of East, you can compare the effects of market volatilities on New World and Bank of East Asia Limited 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 New World with a short position of Bank of East Asia Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Bank of East Asia Limited.
Diversification Opportunities for New World and Bank of East Asia Limited
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Bank is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Bank of East in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of East Asia Limited and New World 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 New World Development are associated (or correlated) with Bank of East Asia Limited. 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 East Asia Limited has no effect on the direction of New World i.e., New World and Bank of East Asia Limited go up and down completely randomly.
Pair Corralation between New World and Bank of East Asia Limited
Assuming the 90 days horizon New World is expected to generate 2.84 times less return on investment than Bank of East Asia Limited. In addition to that, New World is 5.79 times more volatile than Bank of East. It trades about 0.01 of its total potential returns per unit of risk. Bank of East is currently generating about 0.23 per unit of volatility. If you would invest 127.00 in Bank of East on December 2, 2024 and sell it today you would earn a total of 18.00 from holding Bank of East or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.44% |
| Values | Daily Returns |
New World Development vs. Bank of East
Performance |
| Timeline |
| New World Development |
| Bank of East Asia Limited |
New World and Bank of East Asia Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Bank of East Asia Limited
The main advantage of trading using opposite New World and Bank of East Asia Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Bank of East Asia Limited 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 East Asia Limited will offset losses from the drop in Bank of East Asia Limited's long position.| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
| Bank of East Asia Limited vs. First Foundation | Bank of East Asia Limited vs. Metropolitan Bank Holding | Bank of East Asia Limited vs. MT Bank | Bank of East Asia Limited vs. Regions Financial |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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