Correlation Between China Merchants and Hengdian Entertainment
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By analyzing existing cross correlation between China Merchants Shekou and Hengdian Entertainment Co, you can compare the effects of market volatilities on China Merchants and Hengdian Entertainment 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 China Merchants with a short position of Hengdian Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Hengdian Entertainment.
Diversification Opportunities for China Merchants and Hengdian Entertainment
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Hengdian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Shekou and Hengdian Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengdian Entertainment and China Merchants 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 China Merchants Shekou are associated (or correlated) with Hengdian Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengdian Entertainment has no effect on the direction of China Merchants i.e., China Merchants and Hengdian Entertainment go up and down completely randomly.
Pair Corralation between China Merchants and Hengdian Entertainment
Assuming the 90 days trading horizon China Merchants Shekou is expected to under-perform the Hengdian Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Shekou is 1.86 times less risky than Hengdian Entertainment. The stock trades about -0.09 of its potential returns per unit of risk. The Hengdian Entertainment Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,394 in Hengdian Entertainment Co on September 12, 2024 and sell it today you would earn a total of 191.00 from holding Hengdian Entertainment Co or generate 13.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Shekou vs. Hengdian Entertainment Co
Performance |
| Timeline |
| China Merchants Shekou |
| Hengdian Entertainment |
China Merchants and Hengdian Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Hengdian Entertainment
The main advantage of trading using opposite China Merchants and Hengdian Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Hengdian Entertainment 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 Hengdian Entertainment will offset losses from the drop in Hengdian Entertainment's long position.| China Merchants vs. Chongqing Brewery Co | China Merchants vs. Duzhe Publishing Media | China Merchants vs. Chinese Universe Publishing | China Merchants vs. Zhejiang Publishing Media |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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