Correlation Between Bank of China and OBIC CoLtd

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

Diversification Opportunities for Bank of China and OBIC CoLtd

-0.45

Correlation Coefficient

Bank of China  OBIC CoLtd

Very good diversification

The 3 months correlation between Bank and OBIC is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and OBIC CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBIC CoLtd 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 OBIC CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBIC CoLtd has no effect on the direction of Bank of China i.e., Bank of China and OBIC CoLtd go up and down completely randomly.

Pair Corralation between Bank of China and OBIC CoLtd

Assuming the 90 days horizon Bank of China is expected to generate 4.52 times more return on investment than OBIC CoLtd. However, Bank of China is 4.52 times more volatile than OBIC CoLtd. It trades about 0.09 of its potential returns per unit of risk. OBIC CoLtd is currently generating about 0.0 per unit of risk. If you would invest  14.00  in Bank of China on October 5, 2024 and sell it today you would earn a total of  35.00  from holding Bank of China or generate 250.0% return on investment over 90 days.

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

Bank of China  vs.  OBIC CoLtd

Bank of China

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Bank of China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Bank of China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

OBIC CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OBIC CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank of China and OBIC CoLtd

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

The idea behind Bank of China and OBIC CoLtd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.