Correlation Between Bank of China and Cinda Securities

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

Diversification Opportunities for Bank of China and Cinda Securities

-0.23

Correlation Coefficient

Bank of China  Cinda Securities

Very good diversification

The 3 months correlation between Bank and Cinda is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Cinda Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinda Securities 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 Cinda Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinda Securities has no effect on the direction of Bank of China i.e., Bank of China and Cinda Securities go up and down completely randomly.

Pair Corralation between Bank of China and Cinda Securities

Assuming the 90 days trading horizon Bank of China is expected to generate 0.43 times more return on investment than Cinda Securities. However, Bank of China is 2.32 times less risky than Cinda Securities. It trades about 0.09 of its potential returns per unit of risk. Cinda Securities Co is currently generating about 0.03 per unit of risk. If you would invest  302.00  in Bank of China on October 5, 2024 and sell it today you would earn a total of  235.00  from holding Bank of China or generate 77.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.53%
Values	Daily Returns

Bank of China  vs.  Cinda Securities Co

Bank of China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 8 (%) 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.

Cinda Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cinda Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank of China and Cinda Securities

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

The idea behind Bank of China and Cinda Securities Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.