Correlation Between CHINA HUARONG and Bank of China
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and Bank of 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 CHINA HUARONG and Bank of China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and Bank of China, you can compare the effects of market volatilities on CHINA HUARONG and Bank of 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 CHINA HUARONG with a short position of Bank of China. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Bank of China.
Diversification Opportunities for CHINA HUARONG and Bank of China
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CHINA and Bank is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China and CHINA HUARONG 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 HUARONG ENERHD 50 are associated (or correlated) with Bank of China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and Bank of China go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Bank of China
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 5.7 times more return on investment than Bank of China. However, CHINA HUARONG is 5.7 times more volatile than Bank of China. It trades about 0.07 of its potential returns per unit of risk. Bank of China is currently generating about 0.12 per unit of risk. If you would invest 0.15 in CHINA HUARONG ENERHD 50 on September 25, 2024 and sell it today you would earn a total of 0.00 from holding CHINA HUARONG ENERHD 50 or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Bank of China
Performance |
Timeline |
CHINA HUARONG ENERHD |
Bank of China |
CHINA HUARONG and Bank of China Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CHINA HUARONG and Bank of China
The main advantage of trading using opposite CHINA HUARONG and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, Bank of 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 Bank of China will offset losses from the drop in Bank of China's long position.CHINA HUARONG vs. Alibaba Group Holding | CHINA HUARONG vs. ConocoPhillips | CHINA HUARONG vs. CNOOC | CHINA HUARONG vs. EOG Resources |
Bank of China vs. Wells Fargo | Bank of China vs. China Construction Bank | Bank of China vs. HSBC Holdings plc | Bank of China vs. HSBC Holdings plc |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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