Correlation Between Bank of China and PLAYTECH

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

Diversification Opportunities for Bank of China and PLAYTECH

0.57

Correlation Coefficient

Bank of China  PLAYTECH

Very weak diversification

The 3 months correlation between Bank and PLAYTECH is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and PLAYTECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTECH 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 PLAYTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTECH has no effect on the direction of Bank of China i.e., Bank of China and PLAYTECH go up and down completely randomly.

Pair Corralation between Bank of China and PLAYTECH

Assuming the 90 days horizon Bank of China is expected to generate 2.66 times more return on investment than PLAYTECH. However, Bank of China is 2.66 times more volatile than PLAYTECH. It trades about 0.16 of its potential returns per unit of risk. PLAYTECH is currently generating about 0.02 per unit of risk. If you would invest  37.00  in Bank of China on December 30, 2024 and sell it today you would earn a total of  17.00  from holding Bank of China or generate 45.95% return on investment over 90 days.

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

Bank of China  vs.  PLAYTECH

Bank of China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bank of China reported solid returns over the last few months and may actually be approaching a breakup point.

PLAYTECH

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTECH are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PLAYTECH is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of China and PLAYTECH

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

The idea behind Bank of China and PLAYTECH 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.