Correlation Between Bank of China and China International

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

Diversification Opportunities for Bank of China and China International

0.0

Correlation Coefficient

Bank of China  China International

Pay attention - limited upside

The 3 months correlation between Bank and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and China International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International 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 China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of Bank of China i.e., Bank of China and China International go up and down completely randomly.

Pair Corralation between Bank of China and China International

If you would invest (100.00) in China International Capital on October 4, 2024 and sell it today you would earn a total of  100.00  from holding China International Capital or generate -100.0% return on investment over 90 days.

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

Bank of China  vs.  China International Capital

Bank of China

Risk-Adjusted Performance

0 of 100

OK

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China International Capital 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 China International

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

The idea behind Bank of China and China International Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.