Correlation Between BANK OF CHINA and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both BANK OF CHINA and Aedas Homes 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 Aedas Homes 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 Aedas Homes SA, you can compare the effects of market volatilities on BANK OF CHINA and Aedas Homes 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OF CHINA and Aedas Homes.
Diversification Opportunities for BANK OF CHINA and Aedas Homes
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANK and Aedas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of BANK OF CHINA i.e., BANK OF CHINA and Aedas Homes go up and down completely randomly.
Pair Corralation between BANK OF CHINA and Aedas Homes
Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 3.58 times more return on investment than Aedas Homes. However, BANK OF CHINA is 3.58 times more volatile than Aedas Homes SA. It trades about 0.07 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.12 per unit of risk. If you would invest 10.00 in BANK OF CHINA on November 6, 2024 and sell it today you would earn a total of 40.00 from holding BANK OF CHINA or generate 400.0% 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. Aedas Homes SA
Performance |
| Timeline |
| BANK OF CHINA |
| Aedas Homes SA |
BANK OF CHINA and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OF CHINA and Aedas Homes
The main advantage of trading using opposite BANK OF CHINA and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OF CHINA position performs unexpectedly, Aedas Homes 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| BANK OF CHINA vs. Australian Agricultural | BANK OF CHINA vs. ALBIS LEASING AG | BANK OF CHINA vs. Air Lease | BANK OF CHINA vs. FUYO GENERAL LEASE |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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