Correlation Between ONWARD MEDICAL and BANK OF CHINA

Can any of the company-specific risk be diversified away by investing in both ONWARD MEDICAL and BANK OF CHINA 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 ONWARD MEDICAL and BANK OF CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ONWARD MEDICAL BV and BANK OF CHINA, you can compare the effects of market volatilities on ONWARD MEDICAL and BANK OF CHINA 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 ONWARD MEDICAL with a short position of BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONWARD MEDICAL and BANK OF CHINA.

Diversification Opportunities for ONWARD MEDICAL and BANK OF CHINA

0.74

Correlation Coefficient

ONWARD MEDICAL  BANK OF CHINA

Poor diversification

The 3 months correlation between ONWARD and BANK is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ONWARD MEDICAL BV and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA and ONWARD MEDICAL 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 ONWARD MEDICAL BV are associated (or correlated) with BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of ONWARD MEDICAL i.e., ONWARD MEDICAL and BANK OF CHINA go up and down completely randomly.

Pair Corralation between ONWARD MEDICAL and BANK OF CHINA

Assuming the 90 days horizon ONWARD MEDICAL BV is expected to generate 1.04 times more return on investment than BANK OF CHINA. However, ONWARD MEDICAL is 1.04 times more volatile than BANK OF CHINA. It trades about 0.17 of its potential returns per unit of risk. BANK OF CHINA is currently generating about 0.16 per unit of risk. If you would invest  461.00  in ONWARD MEDICAL BV on October 26, 2024 and sell it today you would earn a total of  203.00  from holding ONWARD MEDICAL BV or generate 44.03% return on investment over 90 days.

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

ONWARD MEDICAL BV  vs.  BANK OF CHINA

ONWARD MEDICAL BV

Risk-Adjusted Performance

13 of 100

OK

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

BANK OF CHINA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF CHINA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, BANK OF CHINA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ONWARD MEDICAL and BANK OF CHINA

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

The idea behind ONWARD MEDICAL BV and BANK OF CHINA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.