Correlation Between China Citic and Bank of the Philippine Is

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

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

Diversification Opportunities for China Citic and Bank of the Philippine Is

0.64

Correlation Coefficient

China Citic  Bank of the Philippine Is

Poor diversification

The 3 months correlation between China and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the Philippine Is and China Citic 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 China Citic Bank are associated (or correlated) with Bank of the Philippine Is. 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 the Philippine Is has no effect on the direction of China Citic i.e., China Citic and Bank of the Philippine Is go up and down completely randomly.

Pair Corralation between China Citic and Bank of the Philippine Is

Assuming the 90 days horizon China Citic Bank is expected to generate 1.39 times more return on investment than Bank of the Philippine Is. However, China Citic is 1.39 times more volatile than Bank of the. It trades about 0.09 of its potential returns per unit of risk. Bank of the is currently generating about 0.03 per unit of risk. If you would invest  1,223  in China Citic Bank on December 28, 2024 and sell it today you would earn a total of  209.00  from holding China Citic Bank or generate 17.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

China Citic Bank  vs.  Bank of the

China Citic Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking indicators, China Citic showed solid returns over the last few months and may actually be approaching a breakup point.

Bank of the Philippine Is

Risk-Adjusted Performance

Insignificant

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.

Pair Trading with China Citic and Bank of the Philippine Is

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

The idea behind China Citic Bank and Bank of the 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.