Correlation Between BANK OCHINA and IND+COMMBK CHINA
Can any of the company-specific risk be diversified away by investing in both BANK OCHINA and IND+COMMBK CHINA 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 OCHINA and IND+COMMBK CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK OCHINA H and INDCOMMBK CHINA ADR20, you can compare the effects of market volatilities on BANK OCHINA and IND+COMMBK CHINA 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 OCHINA with a short position of IND+COMMBK CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OCHINA and IND+COMMBK CHINA.
Diversification Opportunities for BANK OCHINA and IND+COMMBK CHINA
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BANK and IND+COMMBK is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BANK OCHINA H and INDCOMMBK CHINA ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDCOMMBK CHINA ADR20 and BANK OCHINA 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 OCHINA H are associated (or correlated) with IND+COMMBK CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDCOMMBK CHINA ADR20 has no effect on the direction of BANK OCHINA i.e., BANK OCHINA and IND+COMMBK CHINA go up and down completely randomly.
Pair Corralation between BANK OCHINA and IND+COMMBK CHINA
Assuming the 90 days trading horizon BANK OCHINA H is expected to generate 0.87 times more return on investment than IND+COMMBK CHINA. However, BANK OCHINA H is 1.15 times less risky than IND+COMMBK CHINA. It trades about 0.05 of its potential returns per unit of risk. INDCOMMBK CHINA ADR20 is currently generating about 0.04 per unit of risk. If you would invest 668.00 in BANK OCHINA H on August 28, 2024 and sell it today you would earn a total of 402.00 from holding BANK OCHINA H or generate 60.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK OCHINA H vs. INDCOMMBK CHINA ADR20
Performance |
| Timeline |
| BANK OCHINA H |
| INDCOMMBK CHINA ADR20 |
BANK OCHINA and IND+COMMBK CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OCHINA and IND+COMMBK CHINA
The main advantage of trading using opposite BANK OCHINA and IND+COMMBK CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OCHINA position performs unexpectedly, IND+COMMBK CHINA 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 IND+COMMBK CHINA will offset losses from the drop in IND+COMMBK CHINA's long position.| BANK OCHINA vs. AGRICULTBK HADR25 YC | BANK OCHINA vs. The Toronto Dominion Bank | BANK OCHINA vs. Superior Plus Corp | BANK OCHINA vs. NMI Holdings |
| IND+COMMBK CHINA vs. Data3 Limited | IND+COMMBK CHINA vs. Datang International Power | IND+COMMBK CHINA vs. Information Services International Dentsu | IND+COMMBK CHINA vs. AM EAGLE OUTFITTERS |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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