Correlation Between BANK OF CHINA and Hua Hong
Can any of the company-specific risk be diversified away by investing in both BANK OF CHINA and Hua Hong 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 Hua Hong 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 Hua Hong Semiconductor, you can compare the effects of market volatilities on BANK OF CHINA and Hua Hong 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 Hua Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OF CHINA and Hua Hong.
Diversification Opportunities for BANK OF CHINA and Hua Hong
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANK and Hua is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and Hua Hong Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Hong Semiconductor 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 Hua Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Hong Semiconductor has no effect on the direction of BANK OF CHINA i.e., BANK OF CHINA and Hua Hong go up and down completely randomly.
Pair Corralation between BANK OF CHINA and Hua Hong
Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 2.68 times more return on investment than Hua Hong. However, BANK OF CHINA is 2.68 times more volatile than Hua Hong Semiconductor. It trades about 0.23 of its potential returns per unit of risk. Hua Hong Semiconductor is currently generating about 0.21 per unit of risk. If you would invest 36.00 in BANK OF CHINA on November 4, 2024 and sell it today you would earn a total of 14.00 from holding BANK OF CHINA or generate 38.89% 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. Hua Hong Semiconductor
Performance |
| Timeline |
| BANK OF CHINA |
| Hua Hong Semiconductor |
BANK OF CHINA and Hua Hong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OF CHINA and Hua Hong
The main advantage of trading using opposite BANK OF CHINA and Hua Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OF CHINA position performs unexpectedly, Hua Hong 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 Hua Hong will offset losses from the drop in Hua Hong's long position.| BANK OF CHINA vs. Boyd Gaming | BANK OF CHINA vs. SAFEROADS HLDGS | BANK OF CHINA vs. GigaMedia | BANK OF CHINA vs. Broadcom |
| Hua Hong vs. Air Transport Services | Hua Hong vs. Cass Information Systems | Hua Hong vs. Extra Space Storage | Hua Hong vs. Linedata Services SA |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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