Correlation Between Bank of China Limited and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and Dow Jones 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 Bank of China Limited and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of China and Dow Jones Industrial, you can compare the effects of market volatilities on Bank of China Limited and Dow Jones 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 Bank of China Limited with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and Dow Jones.
Diversification Opportunities for Bank of China Limited and Dow Jones
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Dow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Bank of China Limited 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 Bank of China are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Dow Jones go up and down completely randomly.
Pair Corralation between Bank of China Limited and Dow Jones
Assuming the 90 days horizon Bank of China Limited is expected to generate 16.3 times less return on investment than Dow Jones. In addition to that, Bank of China Limited is 1.9 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. Dow Jones Industrial
Performance |
| Timeline |
Bank of China Limited and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Bank of China
Pair trading matchups for Bank of China Limited
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Bank of China Limited and Dow Jones
The main advantage of trading using opposite Bank of China Limited and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Bank of China Limited vs. Superior Plus Corp | Bank of China Limited vs. NMI Holdings | Bank of China Limited vs. Origin Agritech | Bank of China Limited vs. SIVERS SEMICONDUCTORS AB |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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