Correlation Between Bank of East Asia Limited and Bankinter

Can any of the company-specific risk be diversified away by investing in both Bank of East Asia Limited and Bankinter 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 East Asia Limited and Bankinter into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of East and Bankinter SA ADR, you can compare the effects of market volatilities on Bank of East Asia Limited and Bankinter 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 East Asia Limited with a short position of Bankinter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of East Asia Limited and Bankinter.

Diversification Opportunities for Bank of East Asia Limited and Bankinter

-0.34

Correlation Coefficient

Bank of East Asia Limited  Bankinter

Very good diversification

The 3 months correlation between Bank and Bankinter is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of East and Bankinter SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankinter SA ADR and Bank of East Asia 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 East are associated (or correlated) with Bankinter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankinter SA ADR has no effect on the direction of Bank of East Asia Limited i.e., Bank of East Asia Limited and Bankinter go up and down completely randomly.

Pair Corralation between Bank of East Asia Limited and Bankinter

Assuming the 90 days horizon Bank of East is expected to generate 1.54 times more return on investment than Bankinter. However, Bank of East Asia Limited is 1.54 times more volatile than Bankinter SA ADR. It trades about 0.02 of its potential returns per unit of risk. Bankinter SA ADR is currently generating about -0.06 per unit of risk. If you would invest  123.00  in Bank of East on August 30, 2024 and sell it today you would lose (1.00) from holding Bank of East or give up 0.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bank of East  vs.  Bankinter SA ADR

Bank of East Asia Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of East are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Bank of East Asia Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bankinter SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankinter SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of East Asia Limited and Bankinter

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

The idea behind Bank of East and Bankinter SA ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.