Correlation Between SwissCom and Bank of East Asia Limited

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

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

Diversification Opportunities for SwissCom and Bank of East Asia Limited

0.71

Correlation Coefficient

SwissCom  Bank of East Asia Limited

Poor diversification

The 3 months correlation between SwissCom and Bank is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SwissCom AG and Bank of East in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of East Asia Limited and SwissCom 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 SwissCom AG are associated (or correlated) with Bank of East Asia 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 East Asia Limited has no effect on the direction of SwissCom i.e., SwissCom and Bank of East Asia Limited go up and down completely randomly.

Pair Corralation between SwissCom and Bank of East Asia Limited

Assuming the 90 days horizon SwissCom is expected to generate 2.57 times less return on investment than Bank of East Asia Limited. But when comparing it to its historical volatility, SwissCom AG is 2.1 times less risky than Bank of East Asia Limited. It trades about 0.1 of its potential returns per unit of risk. Bank of East is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  127.00  in Bank of East on December 20, 2024 and sell it today you would earn a total of  19.00  from holding Bank of East or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

SwissCom AG  vs.  Bank of East

SwissCom AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SwissCom AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SwissCom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bank of East Asia Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of East are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank of East Asia Limited showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SwissCom and Bank of East Asia Limited

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

The idea behind SwissCom AG and Bank of East 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.