Correlation Between Bank of China Limited and POWER METALS
Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and POWER METALS 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 POWER METALS 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 POWER METALS, you can compare the effects of market volatilities on Bank of China Limited and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and POWER METALS.
Diversification Opportunities for Bank of China Limited and POWER METALS
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and POWER is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and POWER METALS go up and down completely randomly.
Pair Corralation between Bank of China Limited and POWER METALS
Assuming the 90 days horizon Bank of China is expected to generate 1.14 times more return on investment than POWER METALS. However, Bank of China Limited is 1.14 times more volatile than POWER METALS. It trades about 0.06 of its potential returns per unit of risk. POWER METALS is currently generating about 0.02 per unit of risk. If you would invest 14.00 in Bank of China on September 2, 2024 and sell it today you would earn a total of 29.00 from holding Bank of China or generate 207.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. POWER METALS
Performance |
| Timeline |
| Bank of China Limited |
| POWER METALS |
Bank of China Limited and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China Limited and POWER METALS
The main advantage of trading using opposite Bank of China Limited and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS'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 |
| POWER METALS vs. SIVERS SEMICONDUCTORS AB | POWER METALS vs. Darden Restaurants | POWER METALS vs. Reliance Steel Aluminum | POWER METALS vs. Q2M Managementberatung AG |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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