Correlation Between Bank Central and China National

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

By analyzing existing cross correlation between Bank Central Asia and China National Building, you can compare the effects of market volatilities on Bank Central and China National 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 Central with a short position of China National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and China National.

Diversification Opportunities for Bank Central and China National

-0.36

Correlation Coefficient

Bank Central  China National

Very good diversification

The 3 months correlation between Bank and China is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and China National Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Building and Bank Central 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 Central Asia are associated (or correlated) with China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Building has no effect on the direction of Bank Central i.e., Bank Central and China National go up and down completely randomly.

Pair Corralation between Bank Central and China National

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the China National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 3.58 times less risky than China National. The pink sheet trades about -0.04 of its potential returns per unit of risk. The China National Building is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,455  in China National Building on September 2, 2024 and sell it today you would earn a total of  666.00  from holding China National Building or generate 45.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bank Central Asia  vs.  China National Building

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bank Central is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China National Building

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China National Building are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, China National showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and China National

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

The idea behind Bank Central Asia and China National Building 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.