Correlation Between BANK OF CHINA and AerCap Holdings

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

Diversification Opportunities for BANK OF CHINA and AerCap Holdings

0.35

Correlation Coefficient

BANK OF CHINA  AerCap Holdings

Weak diversification

The 3 months correlation between BANK and AerCap is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of BANK OF CHINA i.e., BANK OF CHINA and AerCap Holdings go up and down completely randomly.

Pair Corralation between BANK OF CHINA and AerCap Holdings

Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 3.67 times more return on investment than AerCap Holdings. However, BANK OF CHINA is 3.67 times more volatile than AerCap Holdings NV. It trades about 0.15 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.06 per unit of risk. If you would invest  33.00  in BANK OF CHINA on October 24, 2024 and sell it today you would earn a total of  15.00  from holding BANK OF CHINA or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

BANK OF CHINA  vs.  AerCap Holdings NV

BANK OF CHINA

Risk-Adjusted Performance

12 of 100

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. In spite of comparatively fragile basic indicators, BANK OF CHINA unveiled solid returns over the last few months and may actually be approaching a breakup point.

AerCap Holdings NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK OF CHINA and AerCap Holdings

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

The idea behind BANK OF CHINA and AerCap Holdings NV 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.