Correlation Between Bank of China and GalaxyCore

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

Diversification Opportunities for Bank of China and GalaxyCore

0.48

Correlation Coefficient

Bank of China  GalaxyCore

Very weak diversification

The 3 months correlation between Bank and GalaxyCore is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and GalaxyCore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GalaxyCore 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 GalaxyCore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GalaxyCore has no effect on the direction of Bank of China i.e., Bank of China and GalaxyCore go up and down completely randomly.

Pair Corralation between Bank of China and GalaxyCore

Assuming the 90 days trading horizon Bank of China is expected to generate 1.9 times less return on investment than GalaxyCore. But when comparing it to its historical volatility, Bank of China is 2.56 times less risky than GalaxyCore. It trades about 0.09 of its potential returns per unit of risk. GalaxyCore is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,271  in GalaxyCore on September 22, 2024 and sell it today you would earn a total of  345.00  from holding GalaxyCore or generate 27.14% 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.  GalaxyCore

Bank of China

Risk-Adjusted Performance

11 of 100

Good

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

GalaxyCore

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GalaxyCore are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GalaxyCore sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of China and GalaxyCore

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

The idea behind Bank of China and GalaxyCore 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.