Correlation Between China Development and Mercuries Life
Can any of the company-specific risk be diversified away by investing in both China Development and Mercuries Life 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 Development and Mercuries Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Mercuries Life Insurance, you can compare the effects of market volatilities on China Development and Mercuries Life 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 Development with a short position of Mercuries Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Mercuries Life.
Diversification Opportunities for China Development and Mercuries Life
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Mercuries is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Mercuries Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Life Insurance and China Development 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 Development Financial are associated (or correlated) with Mercuries Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Life Insurance has no effect on the direction of China Development i.e., China Development and Mercuries Life go up and down completely randomly.
Pair Corralation between China Development and Mercuries Life
Assuming the 90 days trading horizon China Development Financial is expected to generate 1.52 times more return on investment than Mercuries Life. However, China Development is 1.52 times more volatile than Mercuries Life Insurance. It trades about 0.04 of its potential returns per unit of risk. Mercuries Life Insurance is currently generating about -0.06 per unit of risk. If you would invest 1,705 in China Development Financial on August 24, 2024 and sell it today you would earn a total of 15.00 from holding China Development Financial or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Mercuries Life Insurance
Performance |
| Timeline |
| China Development |
| Mercuries Life Insurance |
China Development and Mercuries Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Mercuries Life
The main advantage of trading using opposite China Development and Mercuries Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Mercuries Life 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 Mercuries Life will offset losses from the drop in Mercuries Life's long position.| China Development vs. Fubon Financial Holding | China Development vs. Cathay Financial Holding | China Development vs. ESUN Financial Holding |
| Mercuries Life vs. Fubon Financial Holding | Mercuries Life vs. Cathay Financial Holding | Mercuries Life vs. ESUN Financial Holding |
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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