Correlation Between Bank of China and Iat Automobile

Can any of the company-specific risk be diversified away by investing in both Bank of China and Iat Automobile 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 Iat Automobile 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 Iat Automobile Technology, you can compare the effects of market volatilities on Bank of China and Iat Automobile 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 Iat Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and Iat Automobile.

Diversification Opportunities for Bank of China and Iat Automobile

0.08

Correlation Coefficient

Bank of China  Iat Automobile

Significant diversification

The 3 months correlation between Bank and Iat is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Iat Automobile Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iat Automobile Technology 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 Iat Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iat Automobile Technology has no effect on the direction of Bank of China i.e., Bank of China and Iat Automobile go up and down completely randomly.

Pair Corralation between Bank of China and Iat Automobile

Assuming the 90 days trading horizon Bank of China is expected to generate 0.32 times more return on investment than Iat Automobile. However, Bank of China is 3.13 times less risky than Iat Automobile. It trades about 0.1 of its potential returns per unit of risk. Iat Automobile Technology is currently generating about -0.02 per unit of risk. If you would invest  377.00  in Bank of China on October 5, 2024 and sell it today you would earn a total of  158.00  from holding Bank of China or generate 41.91% return on investment over 90 days.

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

Bank of China  vs.  Iat Automobile Technology

Bank of China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 7 (%) 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 February 2025.

Iat Automobile Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iat Automobile Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of China and Iat Automobile

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

The idea behind Bank of China and Iat Automobile Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .