Correlation Between BANK OCHINA and SMA Solar
Can any of the company-specific risk be diversified away by investing in both BANK OCHINA and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on BANK OCHINA and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OCHINA and SMA Solar.
Diversification Opportunities for BANK OCHINA and SMA Solar
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BANK and SMA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BANK OCHINA H and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of BANK OCHINA i.e., BANK OCHINA and SMA Solar go up and down completely randomly.
Pair Corralation between BANK OCHINA and SMA Solar
Assuming the 90 days trading horizon BANK OCHINA is expected to generate 1.72 times less return on investment than SMA Solar. But when comparing it to its historical volatility, BANK OCHINA H is 3.5 times less risky than SMA Solar. It trades about 0.23 of its potential returns per unit of risk. SMA Solar Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,366 in SMA Solar Technology on September 13, 2024 and sell it today you would earn a total of 144.00 from holding SMA Solar Technology or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK OCHINA H vs. SMA Solar Technology
Performance |
| Timeline |
| BANK OCHINA H |
| SMA Solar Technology |
BANK OCHINA and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OCHINA and SMA Solar
The main advantage of trading using opposite BANK OCHINA and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OCHINA position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| BANK OCHINA vs. NORWEGIAN AIR SHUT | BANK OCHINA vs. CarsalesCom | BANK OCHINA vs. FAST RETAIL ADR | BANK OCHINA vs. FLOW TRADERS LTD |
| SMA Solar vs. Hochschild Mining plc | SMA Solar vs. CI GAMES SA | SMA Solar vs. GAMESTOP | SMA Solar vs. International Game Technology |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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