Correlation Between Bank of China Limited and Schibsted ASA

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Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and Schibsted ASA 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 Schibsted ASA 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 Schibsted ASA A, you can compare the effects of market volatilities on Bank of China Limited and Schibsted ASA 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 Schibsted ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and Schibsted ASA.

Diversification Opportunities for Bank of China Limited and Schibsted ASA

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Schibsted is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Schibsted ASA A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schibsted ASA A 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 Schibsted ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schibsted ASA A has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Schibsted ASA go up and down completely randomly.

Pair Corralation between Bank of China Limited and Schibsted ASA

Assuming the 90 days horizon Bank of China is expected to generate 5.62 times more return on investment than Schibsted ASA. However, Bank of China Limited is 5.62 times more volatile than Schibsted ASA A. It trades about 0.27 of its potential returns per unit of risk. Schibsted ASA A is currently generating about -0.44 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 Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank of China  vs.  Schibsted ASA A

 Performance 
       Timeline  
Bank of China Limited 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of China Limited reported solid returns over the last few months and may actually be approaching a breakup point.
Schibsted ASA A 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Schibsted ASA A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Schibsted ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bank of China Limited and Schibsted ASA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of China Limited and Schibsted ASA

The main advantage of trading using opposite Bank of China Limited and Schibsted ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China Limited position performs unexpectedly, Schibsted ASA 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 Schibsted ASA will offset losses from the drop in Schibsted ASA's long position.
The idea behind Bank of China and Schibsted ASA A pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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