Correlation Between Bank of Communications and Sinosteel Luonai

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

By analyzing existing cross correlation between Bank of Communications and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Bank of Communications and Sinosteel Luonai 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 of Communications with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Communications and Sinosteel Luonai.

Diversification Opportunities for Bank of Communications and Sinosteel Luonai

-0.34

Correlation Coefficient

Bank of Communications  Sinosteel Luonai

Very good diversification

The 3 months correlation between Bank and Sinosteel is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Communications and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Bank of Communications 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 of Communications are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Bank of Communications i.e., Bank of Communications and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Bank of Communications and Sinosteel Luonai

Assuming the 90 days trading horizon Bank of Communications is expected to generate 0.57 times more return on investment than Sinosteel Luonai. However, Bank of Communications is 1.74 times less risky than Sinosteel Luonai. It trades about 0.08 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.04 per unit of risk. If you would invest  456.00  in Bank of Communications on October 9, 2024 and sell it today you would earn a total of  285.00  from holding Bank of Communications or generate 62.5% return on investment over 90 days.

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

Bank of Communications  vs.  Sinosteel Luonai Materials

Bank of Communications

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sinosteel Luonai Mat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank of Communications and Sinosteel Luonai

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

The idea behind Bank of Communications and Sinosteel Luonai Materials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.