Correlation Between Guangxi Guiguan and Bank of China Limited

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

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

Diversification Opportunities for Guangxi Guiguan and Bank of China Limited

0.26

Correlation Coefficient

Guangxi Guiguan  Bank of China Limited

Modest diversification

The 3 months correlation between Guangxi and Bank is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Guangxi Guiguan Electric and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited and Guangxi Guiguan 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 Guangxi Guiguan Electric are associated (or correlated) with Bank of China Limited. 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 Limited has no effect on the direction of Guangxi Guiguan i.e., Guangxi Guiguan and Bank of China Limited go up and down completely randomly.

Pair Corralation between Guangxi Guiguan and Bank of China Limited

Assuming the 90 days trading horizon Guangxi Guiguan Electric is expected to under-perform the Bank of China Limited. But the stock apears to be less risky and, when comparing its historical volatility, Guangxi Guiguan Electric is 1.09 times less risky than Bank of China Limited. The stock trades about -0.07 of its potential returns per unit of risk. The Bank of China is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  553.00  in Bank of China on December 30, 2024 and sell it today you would lose (3.00) from holding Bank of China or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Guangxi Guiguan Electric  vs.  Bank of China

Guangxi Guiguan Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangxi Guiguan Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangxi Guiguan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank of China Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangxi Guiguan and Bank of China Limited

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

The idea behind Guangxi Guiguan Electric and Bank of China 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.