Correlation Between OFFICE DEPOT and Bank of China Limited

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

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

Diversification Opportunities for OFFICE DEPOT and Bank of China Limited

0.0

Correlation Coefficient

OFFICE DEPOT  Bank of China Limited

Pay attention - limited upside

The 3 months correlation between OFFICE and Bank is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding OFFICE DEPOT and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited and OFFICE DEPOT 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 OFFICE DEPOT are associated (or correlated) with Bank of China Limited. 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 Limited has no effect on the direction of OFFICE DEPOT i.e., OFFICE DEPOT and Bank of China Limited go up and down completely randomly.

Pair Corralation between OFFICE DEPOT and Bank of China Limited

If you would invest  44.00  in Bank of China on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Bank of China or generate 11.36% return on investment over 90 days.

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

OFFICE DEPOT  vs.  Bank of China

OFFICE DEPOT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OFFICE DEPOT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, OFFICE DEPOT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Bank of China Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Bank of China Limited reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OFFICE DEPOT and Bank of China Limited

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

The idea behind OFFICE DEPOT 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.