Correlation Between Bank of the Philippine Is and China Everbright

Can any of the company-specific risk be diversified away by investing in both Bank of the Philippine Is and China Everbright 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 the Philippine Is and China Everbright into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of the and China Everbright Bank, you can compare the effects of market volatilities on Bank of the Philippine Is and China Everbright 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 the Philippine Is with a short position of China Everbright. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the Philippine Is and China Everbright.

Diversification Opportunities for Bank of the Philippine Is and China Everbright

0.15

Correlation Coefficient

Bank of the Philippine Is  China Everbright

Average diversification

The 3 months correlation between Bank and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank and Bank of the Philippine Is 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 the are associated (or correlated) with China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Bank of the Philippine Is i.e., Bank of the Philippine Is and China Everbright go up and down completely randomly.

Pair Corralation between Bank of the Philippine Is and China Everbright

Assuming the 90 days horizon Bank of the Philippine Is is expected to generate 1.2 times less return on investment than China Everbright. In addition to that, Bank of the Philippine Is is 3.39 times more volatile than China Everbright Bank. It trades about 0.03 of its total potential returns per unit of risk. China Everbright Bank is currently generating about 0.13 per unit of volatility. If you would invest  37.00  in China Everbright Bank on December 29, 2024 and sell it today you would earn a total of  2.00  from holding China Everbright Bank or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bank of the  vs.  China Everbright Bank

Bank of the Philippine Is

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Bank of the Philippine Is is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Everbright Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, China Everbright is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of the Philippine Is and China Everbright

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

The idea behind Bank of the and China Everbright Bank 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.