Correlation Between NORTHEAST UTILITIES and BANK OF CHINA -H-
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and BANK OF CHINA -H- 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 NORTHEAST UTILITIES and BANK OF CHINA -H- into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and BANK OF CHINA, you can compare the effects of market volatilities on NORTHEAST UTILITIES and BANK OF CHINA -H- 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 NORTHEAST UTILITIES with a short position of BANK OF CHINA -H-. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and BANK OF CHINA -H-.
Diversification Opportunities for NORTHEAST UTILITIES and BANK OF CHINA -H-
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NORTHEAST and BANK is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA -H- and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with BANK OF CHINA -H-. 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 -H- has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and BANK OF CHINA -H- go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and BANK OF CHINA -H-
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 7.27 times less return on investment than BANK OF CHINA -H-. But when comparing it to its historical volatility, NORTHEAST UTILITIES is 2.8 times less risky than BANK OF CHINA -H-. It trades about 0.08 of its potential returns per unit of risk. BANK OF CHINA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 35.00 in BANK OF CHINA on December 11, 2024 and sell it today you would earn a total of 18.00 from holding BANK OF CHINA or generate 51.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. BANK OF CHINA
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| BANK OF CHINA -H- |
NORTHEAST UTILITIES and BANK OF CHINA -H- Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and BANK OF CHINA -H-
The main advantage of trading using opposite NORTHEAST UTILITIES and BANK OF CHINA -H- positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, BANK OF CHINA -H- 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 -H- will offset losses from the drop in BANK OF CHINA -H-'s long position.| NORTHEAST UTILITIES vs. AEGEAN AIRLINES | NORTHEAST UTILITIES vs. Transportadora de Gas | NORTHEAST UTILITIES vs. G III APPAREL GROUP | NORTHEAST UTILITIES vs. URBAN OUTFITTERS |
| BANK OF CHINA -H- vs. Apple Inc | BANK OF CHINA -H- vs. Apple Inc | BANK OF CHINA -H- vs. Apple Inc | BANK OF CHINA -H- vs. Apple Inc |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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