Correlation Between Bank of China and Kidswant Children

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

Diversification Opportunities for Bank of China and Kidswant Children

-0.16

Correlation Coefficient

Bank of China  Kidswant Children

Good diversification

The 3 months correlation between Bank and Kidswant is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Kidswant Children Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kidswant Children 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 Kidswant Children. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kidswant Children has no effect on the direction of Bank of China i.e., Bank of China and Kidswant Children go up and down completely randomly.

Pair Corralation between Bank of China and Kidswant Children

Assuming the 90 days trading horizon Bank of China is expected to generate 0.22 times more return on investment than Kidswant Children. However, Bank of China is 4.56 times less risky than Kidswant Children. It trades about 0.16 of its potential returns per unit of risk. Kidswant Children Products is currently generating about 0.03 per unit of risk. If you would invest  494.00  in Bank of China on October 22, 2024 and sell it today you would earn a total of  51.00  from holding Bank of China or generate 10.32% return on investment over 90 days.

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

Bank of China  vs.  Kidswant Children Products

Bank of China

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 12 (%) 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.

Kidswant Children

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kidswant Children Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kidswant Children may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bank of China and Kidswant Children

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

The idea behind Bank of China and Kidswant Children Products 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.