Correlation Between Bank of China and PAX GLOBAL
Can any of the company-specific risk be diversified away by investing in both Bank of China and PAX GLOBAL 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 and PAX GLOBAL 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 PAX GLOBAL TECH, you can compare the effects of market volatilities on Bank of China and PAX GLOBAL 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 with a short position of PAX GLOBAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and PAX GLOBAL.
Diversification Opportunities for Bank of China and PAX GLOBAL
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and PAX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and PAX GLOBAL TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX GLOBAL TECH and Bank of China 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 PAX GLOBAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX GLOBAL TECH has no effect on the direction of Bank of China i.e., Bank of China and PAX GLOBAL go up and down completely randomly.
Pair Corralation between Bank of China and PAX GLOBAL
Assuming the 90 days horizon Bank of China is expected to generate 1.28 times more return on investment than PAX GLOBAL. However, Bank of China is 1.28 times more volatile than PAX GLOBAL TECH. It trades about 0.08 of its potential returns per unit of risk. PAX GLOBAL TECH is currently generating about 0.09 per unit of risk. If you would invest 14.00 in Bank of China on September 4, 2024 and sell it today you would earn a total of 30.00 from holding Bank of China or generate 214.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bank of China vs. PAX GLOBAL TECH
Performance |
| Timeline |
| Bank of China |
| PAX GLOBAL TECH |
Bank of China and PAX GLOBAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China and PAX GLOBAL
The main advantage of trading using opposite Bank of China and PAX GLOBAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China position performs unexpectedly, PAX GLOBAL 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 PAX GLOBAL will offset losses from the drop in PAX GLOBAL's long position.| Bank of China vs. GOODYEAR T RUBBER | Bank of China vs. X FAB Silicon Foundries | Bank of China vs. Sumitomo Rubber Industries | Bank of China vs. Vishay Intertechnology |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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