Correlation Between Bank of China Limited and Federal Home
Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and Federal Home 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 Federal Home 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 Federal Home Loan, you can compare the effects of market volatilities on Bank of China Limited and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and Federal Home.
Diversification Opportunities for Bank of China Limited and Federal Home
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Federal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Federal Home go up and down completely randomly.
Pair Corralation between Bank of China Limited and Federal Home
Assuming the 90 days horizon Bank of China Limited is expected to generate 260.14 times less return on investment than Federal Home. But when comparing it to its historical volatility, Bank of China is 5.51 times less risky than Federal Home. It trades about 0.01 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 136.00 in Federal Home Loan on August 28, 2024 and sell it today you would earn a total of 158.00 from holding Federal Home Loan or generate 116.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of China vs. Federal Home Loan
Performance |
| Timeline |
| Bank of China Limited |
| Federal Home Loan |
Bank of China Limited and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China Limited and Federal Home
The main advantage of trading using opposite Bank of China Limited and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's 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 |
| Federal Home vs. Superior Plus Corp | Federal Home vs. NMI Holdings | Federal Home vs. Origin Agritech | Federal Home vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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