Correlation Between Bank of China Limited and HUAQIN TECHNOLOGY

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

Diversification Opportunities for Bank of China Limited and HUAQIN TECHNOLOGY

0.52

Correlation Coefficient

Bank of China Limited  HUAQIN TECHNOLOGY

Very weak diversification

The 3 months correlation between Bank and HUAQIN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD 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 HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Bank of China Limited i.e., Bank of China Limited and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Bank of China Limited and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Bank of China Limited is expected to generate 4.22 times less return on investment than HUAQIN TECHNOLOGY. But when comparing it to its historical volatility, Bank of China is 3.13 times less risky than HUAQIN TECHNOLOGY. It trades about 0.11 of its potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,590  in HUAQIN TECHNOLOGY LTD on December 2, 2024 and sell it today you would earn a total of  2,236  from holding HUAQIN TECHNOLOGY LTD or generate 33.93% return on investment over 90 days.

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

Bank of China  vs.  HUAQIN TECHNOLOGY LTD

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.

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of China Limited and HUAQIN TECHNOLOGY

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

The idea behind Bank of China and HUAQIN TECHNOLOGY LTD 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.