Correlation Between BANK OF CHINA -H- and S-E BANKEN

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Can any of the company-specific risk be diversified away by investing in both BANK OF CHINA -H- and S-E BANKEN 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 -H- and S-E BANKEN 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 S E BANKEN A , you can compare the effects of market volatilities on BANK OF CHINA -H- and S-E BANKEN 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 -H- with a short position of S-E BANKEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OF CHINA -H- and S-E BANKEN.

Diversification Opportunities for BANK OF CHINA -H- and S-E BANKEN

BANKS-EDiversified AwayBANKS-EDiversified Away100%
0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between BANK and S-E is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and S E BANKEN A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S E BANKEN and BANK OF CHINA -H- 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 S-E BANKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S E BANKEN has no effect on the direction of BANK OF CHINA -H- i.e., BANK OF CHINA -H- and S-E BANKEN go up and down completely randomly.

Pair Corralation between BANK OF CHINA -H- and S-E BANKEN

Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 3.68 times more return on investment than S-E BANKEN. However, BANK OF CHINA -H- is 3.68 times more volatile than S E BANKEN A . It trades about 0.2 of its potential returns per unit of risk. S E BANKEN A is currently generating about 0.21 per unit of risk. If you would invest  32.00  in BANK OF CHINA on November 26, 2024 and sell it today you would earn a total of  21.00  from holding BANK OF CHINA or generate 65.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

BANK OF CHINA  vs.  S E BANKEN A

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030405060
JavaScript chart by amCharts 3.21.15W8V SEBA
       Timeline  
BANK OF CHINA -H- 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF CHINA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BANK OF CHINA -H- unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.350.40.450.5
S E BANKEN 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in S E BANKEN A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, S-E BANKEN exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1313.51414.515

BANK OF CHINA -H- and S-E BANKEN Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.59-10.18-6.77-3.360.03.637.3811.1314.8918.64 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15W8V SEBA
       Returns  

Pair Trading with BANK OF CHINA -H- and S-E BANKEN

The main advantage of trading using opposite BANK OF CHINA -H- and S-E BANKEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OF CHINA -H- position performs unexpectedly, S-E BANKEN 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 S-E BANKEN will offset losses from the drop in S-E BANKEN's long position.
The idea behind BANK OF CHINA and S E BANKEN 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.
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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