Correlation Between Stellar and BANK OF CHINA

Can any of the company-specific risk be diversified away by investing in both Stellar and BANK OF CHINA 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 Stellar and BANK OF CHINA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stellar and BANK OF CHINA, you can compare the effects of market volatilities on Stellar and BANK OF CHINA 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 Stellar with a short position of BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and BANK OF CHINA.

Diversification Opportunities for Stellar and BANK OF CHINA

-0.5

Correlation Coefficient

Stellar  BANK OF CHINA

Very good diversification

The 3 months correlation between Stellar and BANK is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA and Stellar 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 Stellar are associated (or correlated) with BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of Stellar i.e., Stellar and BANK OF CHINA go up and down completely randomly.

Pair Corralation between Stellar and BANK OF CHINA

Assuming the 90 days trading horizon Stellar is expected to under-perform the BANK OF CHINA. In addition to that, Stellar is 1.39 times more volatile than BANK OF CHINA. It trades about -0.05 of its total potential returns per unit of risk. BANK OF CHINA is currently generating about 0.19 per unit of volatility. 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	Very Weak
Accuracy	93.65%
Values	Daily Returns

Stellar  vs.  BANK OF CHINA

Stellar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Stellar shareholders.

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.

Pair Trading with Stellar and BANK OF CHINA

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

The idea behind Stellar and BANK OF CHINA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.