Correlation Between Bank of China Limited and Hainan Haiqi

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

Diversification Opportunities for Bank of China Limited and Hainan Haiqi

-0.67

Correlation Coefficient

Bank of China Limited  Hainan Haiqi

Excellent diversification

The 3 months correlation between Bank and Hainan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo 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 Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Bank of China Limited and Hainan Haiqi

Assuming the 90 days trading horizon Bank of China Limited is expected to generate 4.1 times less return on investment than Hainan Haiqi. But when comparing it to its historical volatility, Bank of China is 1.99 times less risky than Hainan Haiqi. It trades about 0.02 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,773  in Hainan Haiqi Transportation on December 2, 2024 and sell it today you would earn a total of  42.00  from holding Hainan Haiqi Transportation or generate 2.37% return on investment over 90 days.

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

Bank of China  vs.  Hainan Haiqi Transportation

Bank of China Limited

Risk-Adjusted Performance

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 Limited may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hainan Haiqi Transpo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Haiqi Transportation 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank of China Limited and Hainan Haiqi

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

The idea behind Bank of China and Hainan Haiqi Transportation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.