Correlation Between China Construction and Merry Electronics
Can any of the company-specific risk be diversified away by investing in both China Construction and Merry Electronics 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 China Construction and Merry Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Construction Bank and Merry Electronics Co, you can compare the effects of market volatilities on China Construction and Merry Electronics 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 Construction with a short position of Merry Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Merry Electronics.
Diversification Opportunities for China Construction and Merry Electronics
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Merry is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics and China Construction 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 Construction Bank are associated (or correlated) with Merry Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merry Electronics has no effect on the direction of China Construction i.e., China Construction and Merry Electronics go up and down completely randomly.
Pair Corralation between China Construction and Merry Electronics
Assuming the 90 days trading horizon China Construction Bank is expected to under-perform the Merry Electronics. But the stock apears to be less risky and, when comparing its historical volatility, China Construction Bank is 1.93 times less risky than Merry Electronics. The stock trades about -0.03 of its potential returns per unit of risk. The Merry Electronics Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,110 in Merry Electronics Co on August 30, 2024 and sell it today you would earn a total of 2,340 from holding Merry Electronics Co or generate 28.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 36.95% |
| Values | Daily Returns |
China Construction Bank vs. Merry Electronics Co
Performance |
| Timeline |
| China Construction Bank |
| Merry Electronics |
China Construction and Merry Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Construction and Merry Electronics
The main advantage of trading using opposite China Construction and Merry Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Merry Electronics 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 Merry Electronics will offset losses from the drop in Merry Electronics' long position.| China Construction vs. Taiwan Semiconductor Manufacturing | China Construction vs. Hon Hai Precision | China Construction vs. MediaTek | China Construction vs. Chunghwa Telecom Co |
| Merry Electronics vs. Chung Hwa Food | Merry Electronics vs. Oceanic Beverages Co | Merry Electronics vs. Alchip Technologies | Merry Electronics vs. United Radiant Technology |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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