Correlation Between Bank of China Limited and Yoantion Industrial

Can any of the company-specific risk be diversified away by investing in both Bank of China Limited and Yoantion Industrial 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 Limited and Yoantion Industrial 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 Yoantion Industrial IncLtd, you can compare the effects of market volatilities on Bank of China Limited and Yoantion Industrial 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 Limited with a short position of Yoantion Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China Limited and Yoantion Industrial.

Diversification Opportunities for Bank of China Limited and Yoantion Industrial

0.01

Correlation Coefficient

Bank of China Limited  Yoantion Industrial

Significant diversification

The 3 months correlation between Bank and Yoantion is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Yoantion Industrial IncLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yoantion Industrial and Bank of China Limited 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 Yoantion Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yoantion Industrial has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Yoantion Industrial go up and down completely randomly.

Pair Corralation between Bank of China Limited and Yoantion Industrial

Assuming the 90 days trading horizon Bank of China Limited is expected to generate 91.23 times less return on investment than Yoantion Industrial. But when comparing it to its historical volatility, Bank of China is 3.5 times less risky than Yoantion Industrial. It trades about 0.01 of its potential returns per unit of risk. Yoantion Industrial IncLtd is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,042  in Yoantion Industrial IncLtd on December 27, 2024 and sell it today you would earn a total of  749.00  from holding Yoantion Industrial IncLtd or generate 36.68% 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.  Yoantion Industrial IncLtd

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.

Yoantion Industrial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yoantion Industrial IncLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yoantion Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of China Limited and Yoantion Industrial

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

The idea behind Bank of China and Yoantion Industrial IncLtd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.