Correlation Between Bank of China and Zhejiang Crystal

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

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

Diversification Opportunities for Bank of China and Zhejiang Crystal

0.33

Correlation Coefficient

Bank of China  Zhejiang Crystal

Weak diversification

The 3 months correlation between Bank and Zhejiang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Zhejiang Crystal Optech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Crystal Optech and Bank of China 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 China are associated (or correlated) with Zhejiang Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Crystal Optech has no effect on the direction of Bank of China i.e., Bank of China and Zhejiang Crystal go up and down completely randomly.

Pair Corralation between Bank of China and Zhejiang Crystal

Assuming the 90 days trading horizon Bank of China is expected to generate 0.34 times more return on investment than Zhejiang Crystal. However, Bank of China is 2.93 times less risky than Zhejiang Crystal. It trades about 0.46 of its potential returns per unit of risk. Zhejiang Crystal Optech is currently generating about 0.11 per unit of risk. If you would invest  501.00  in Bank of China on October 1, 2024 and sell it today you would earn a total of  47.00  from holding Bank of China or generate 9.38% return on investment over 90 days.

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

Bank of China  vs.  Zhejiang Crystal Optech

Bank of China

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhejiang Crystal Optech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Crystal Optech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Crystal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of China and Zhejiang Crystal

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

The idea behind Bank of China and Zhejiang Crystal Optech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.