Correlation Between Bank of China and BANK RAKYAT
Can any of the company-specific risk be diversified away by investing in both Bank of China and BANK RAKYAT 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 Bank of China and BANK RAKYAT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of China and BANK RAKYAT IND, you can compare the effects of market volatilities on Bank of China and BANK RAKYAT 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 Bank of China with a short position of BANK RAKYAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and BANK RAKYAT.
Diversification Opportunities for Bank of China and BANK RAKYAT
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and BANK is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND and Bank of China 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 Bank of China are associated (or correlated) with BANK RAKYAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK RAKYAT IND has no effect on the direction of Bank of China i.e., Bank of China and BANK RAKYAT go up and down completely randomly.
Pair Corralation between Bank of China and BANK RAKYAT
Assuming the 90 days horizon Bank of China is expected to generate 2.63 times more return on investment than BANK RAKYAT. However, Bank of China is 2.63 times more volatile than BANK RAKYAT IND. It trades about 0.17 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about -0.13 per unit of risk. If you would invest 37.00 in Bank of China on December 28, 2024 and sell it today you would earn a total of 18.00 from holding Bank of China or generate 48.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of China vs. BANK RAKYAT IND
Performance |
Timeline |
Bank of China |
BANK RAKYAT IND |
Bank of China and BANK RAKYAT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of China and BANK RAKYAT
The main advantage of trading using opposite Bank of China and BANK RAKYAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China position performs unexpectedly, BANK RAKYAT 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 RAKYAT will offset losses from the drop in BANK RAKYAT's long position.Bank of China vs. KINGBOARD CHEMICAL | Bank of China vs. NISSAN CHEMICAL IND | Bank of China vs. IBU tec advanced materials | Bank of China vs. Rayonier Advanced Materials |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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