Correlation Between United Overseas and BOC Hong

Can any of the company-specific risk be diversified away by investing in both United Overseas and BOC Hong 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 United Overseas and BOC Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Overseas Bank and BOC Hong Kong, you can compare the effects of market volatilities on United Overseas and BOC Hong 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 United Overseas with a short position of BOC Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Overseas and BOC Hong.

Diversification Opportunities for United Overseas and BOC Hong

-0.51

Correlation Coefficient

United Overseas  BOC Hong

Excellent diversification

The 3 months correlation between United and BOC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank and BOC Hong Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Hong Kong and United Overseas 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 United Overseas Bank are associated (or correlated) with BOC Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Hong Kong has no effect on the direction of United Overseas i.e., United Overseas and BOC Hong go up and down completely randomly.

Pair Corralation between United Overseas and BOC Hong

Assuming the 90 days horizon United Overseas Bank is expected to generate 0.63 times more return on investment than BOC Hong. However, United Overseas Bank is 1.59 times less risky than BOC Hong. It trades about -0.08 of its potential returns per unit of risk. BOC Hong Kong is currently generating about -0.1 per unit of risk. If you would invest  5,507  in United Overseas Bank on October 10, 2024 and sell it today you would lose (72.00) from holding United Overseas Bank or give up 1.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

United Overseas Bank  vs.  BOC Hong Kong

United Overseas Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BOC Hong Kong

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Hong Kong has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, BOC Hong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Overseas and BOC Hong

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

The idea behind United Overseas Bank and BOC Hong Kong 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .