Correlation Between BANK OF CHINA and MARKET VECTR

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

Diversification Opportunities for BANK OF CHINA and MARKET VECTR

-0.05

Correlation Coefficient

BANK OF CHINA  MARKET VECTR

Good diversification

The 3 months correlation between BANK and MARKET is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and MARKET VECTR RETAIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARKET VECTR RETAIL 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 MARKET VECTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARKET VECTR RETAIL has no effect on the direction of BANK OF CHINA i.e., BANK OF CHINA and MARKET VECTR go up and down completely randomly.

Pair Corralation between BANK OF CHINA and MARKET VECTR

Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 5.34 times more return on investment than MARKET VECTR. However, BANK OF CHINA is 5.34 times more volatile than MARKET VECTR RETAIL. It trades about 0.19 of its potential returns per unit of risk. MARKET VECTR RETAIL is currently generating about -0.11 per unit of risk. If you would invest  35.00  in BANK OF CHINA on December 21, 2024 and sell it today you would earn a total of  21.00  from holding BANK OF CHINA or generate 60.0% 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.  MARKET VECTR RETAIL

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 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BANK OF CHINA unveiled solid returns over the last few months and may actually be approaching a breakup point.

MARKET VECTR RETAIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MARKET VECTR RETAIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MARKET VECTR 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 MARKET VECTR

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

The idea behind BANK OF CHINA and MARKET VECTR RETAIL 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 Stocks Directory module to find actively traded stocks across global markets.