Correlation Between Bank of China Limited and Nantong Haixing

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

Diversification Opportunities for Bank of China Limited and Nantong Haixing

-0.12

Correlation Coefficient

Bank of China Limited  Nantong Haixing

Good diversification

The 3 months correlation between Bank and Nantong is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and Nantong Haixing Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Haixing Elec 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 Nantong Haixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Haixing Elec has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and Nantong Haixing go up and down completely randomly.

Pair Corralation between Bank of China Limited and Nantong Haixing

Assuming the 90 days trading horizon Bank of China is expected to under-perform the Nantong Haixing. But the stock apears to be less risky and, when comparing its historical volatility, Bank of China is 1.74 times less risky than Nantong Haixing. The stock trades about 0.0 of its potential returns per unit of risk. The Nantong Haixing Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,314  in Nantong Haixing Electronics on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Nantong Haixing Electronics or generate 10.88% 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.  Nantong Haixing Electronics

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.

Nantong Haixing Elec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Haixing Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nantong Haixing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of China Limited and Nantong Haixing

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

The idea behind Bank of China and Nantong Haixing Electronics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.