Correlation Between BANK OF CHINA and X-FAB Silicon

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

Diversification Opportunities for BANK OF CHINA and X-FAB Silicon

0.14

Correlation Coefficient

BANK OF CHINA  X-FAB Silicon

Average diversification

The 3 months correlation between BANK and X-FAB is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of BANK OF CHINA i.e., BANK OF CHINA and X-FAB Silicon go up and down completely randomly.

Pair Corralation between BANK OF CHINA and X-FAB Silicon

Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 1.87 times less return on investment than X-FAB Silicon. But when comparing it to its historical volatility, BANK OF CHINA is 1.42 times less risky than X-FAB Silicon. It trades about 0.1 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  501.00  in X FAB Silicon Foundries on October 10, 2024 and sell it today you would earn a total of  20.00  from holding X FAB Silicon Foundries or generate 3.99% return on investment over 90 days.

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

BANK OF CHINA  vs.  X FAB Silicon Foundries

BANK OF CHINA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF CHINA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BANK OF CHINA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BANK OF CHINA and X-FAB Silicon

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

The idea behind BANK OF CHINA and X FAB Silicon Foundries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.