Correlation Between China Merchants and China Railway
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By analyzing existing cross correlation between China Merchants Bank and China Railway Materials, you can compare the effects of market volatilities on China Merchants and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and China Railway.
Diversification Opportunities for China Merchants and China Railway
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and China is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and China Railway Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Materials 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 Bank are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Materials has no effect on the direction of China Merchants i.e., China Merchants and China Railway go up and down completely randomly.
Pair Corralation between China Merchants and China Railway
Assuming the 90 days trading horizon China Merchants Bank is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Bank is 1.32 times less risky than China Railway. The stock trades about -0.15 of its potential returns per unit of risk. The China Railway Materials is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 280.00 in China Railway Materials on September 5, 2024 and sell it today you would earn a total of 14.00 from holding China Railway Materials or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. China Railway Materials
Performance |
| Timeline |
| China Merchants Bank |
| China Railway Materials |
China Merchants and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and China Railway
The main advantage of trading using opposite China Merchants and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.| China Merchants vs. Sino Platinum Metals Co | China Merchants vs. Juewei Food Co | China Merchants vs. Xinjiang Tianrun Dairy | China Merchants vs. Shandong Hongchuang Aluminum |
| China Railway vs. Sinosteel Engineering and | China Railway vs. Xiamen Jihong Package | China Railway vs. Youyou Foods Co | China Railway vs. Aofu Environmental 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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