Correlation Between Bank of China Limited and ENERGY ONE
Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and ENERGY ONE 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 ENERGY ONE 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 ENERGY ONE, you can compare the effects of market volatilities on Bank of China Limited and ENERGY ONE 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 ENERGY ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and ENERGY ONE.
Diversification Opportunities for Bank of China Limited and ENERGY ONE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and ENERGY is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and ENERGY ONE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGY ONE 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 ENERGY ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGY ONE has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and ENERGY ONE go up and down completely randomly.
Pair Corralation between Bank of China Limited and ENERGY ONE
Assuming the 90 days horizon Bank of China is expected to generate 1.29 times more return on investment than ENERGY ONE. However, Bank of China Limited is 1.29 times more volatile than ENERGY ONE. It trades about 0.28 of its potential returns per unit of risk. ENERGY ONE is currently generating about 0.03 per unit of risk. If you would invest 35.00 in Bank of China on October 20, 2024 and sell it today you would earn a total of 13.00 from holding Bank of China or generate 37.14% 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. ENERGY ONE
Performance |
| Timeline |
| Bank of China Limited |
| ENERGY ONE |
Bank of China Limited and ENERGY ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China Limited and ENERGY ONE
The main advantage of trading using opposite Bank of China Limited and ENERGY ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited position performs unexpectedly, ENERGY ONE 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 ENERGY ONE will offset losses from the drop in ENERGY ONE's long position.| Bank of China Limited vs. JPMorgan Chase Co | Bank of China Limited vs. Bank of America | Bank of China Limited vs. Wells Fargo | Bank of China Limited vs. China Construction Bank |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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