Correlation Between CHINA BANK and BANK OCHINA

Can any of the company-specific risk be diversified away by investing in both CHINA BANK and BANK OCHINA 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 CHINA BANK and BANK OCHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA BANK ADR20 and BANK OCHINA H, you can compare the effects of market volatilities on CHINA BANK and BANK OCHINA 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 CHINA BANK with a short position of BANK OCHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA BANK and BANK OCHINA.

Diversification Opportunities for CHINA BANK and BANK OCHINA

0.84

Correlation Coefficient

CHINA BANK  BANK OCHINA

Very poor diversification

The 3 months correlation between CHINA and BANK is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and BANK OCHINA H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OCHINA H and CHINA BANK 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 CHINA BANK ADR20 are associated (or correlated) with BANK OCHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OCHINA H has no effect on the direction of CHINA BANK i.e., CHINA BANK and BANK OCHINA go up and down completely randomly.

Pair Corralation between CHINA BANK and BANK OCHINA

Assuming the 90 days trading horizon CHINA BANK ADR20 is expected to generate 0.86 times more return on investment than BANK OCHINA. However, CHINA BANK ADR20 is 1.16 times less risky than BANK OCHINA. It trades about 0.06 of its potential returns per unit of risk. BANK OCHINA H is currently generating about 0.05 per unit of risk. If you would invest  1,330  in CHINA BANK ADR20 on August 30, 2024 and sell it today you would earn a total of  60.00  from holding CHINA BANK ADR20 or generate 4.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

CHINA BANK ADR20  vs.  BANK OCHINA H

CHINA BANK ADR20

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA BANK may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BANK OCHINA H

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OCHINA H are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BANK OCHINA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CHINA BANK and BANK OCHINA

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

The idea behind CHINA BANK ADR20 and BANK OCHINA H 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.