Correlation Between CompuGroup Medical and Bank of China

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

Diversification Opportunities for CompuGroup Medical and Bank of China

0.08

Correlation Coefficient

CompuGroup Medical  Bank of China

Significant diversification

The 3 months correlation between CompuGroup and Bank is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CompuGroup Medical SE 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 CompuGroup 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 CompuGroup Medical SE 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 CompuGroup Medical i.e., CompuGroup Medical and Bank of China go up and down completely randomly.

Pair Corralation between CompuGroup Medical and Bank of China

Assuming the 90 days trading horizon CompuGroup Medical SE is expected to generate 1.04 times more return on investment than Bank of China. However, CompuGroup Medical is 1.04 times more volatile than Bank of China. It trades about 0.07 of its potential returns per unit of risk. Bank of China is currently generating about 0.05 per unit of risk. If you would invest  1,470  in CompuGroup Medical SE on September 3, 2024 and sell it today you would earn a total of  121.00  from holding CompuGroup Medical SE or generate 8.23% return on investment over 90 days.

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

CompuGroup Medical SE  vs.  Bank of China

CompuGroup Medical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CompuGroup Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of China

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank of China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CompuGroup Medical and Bank of China

The main advantage of trading using opposite CompuGroup Medical and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompuGroup 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 CompuGroup Medical SE 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.