Correlation Between China Merchants and Lutian Machinery
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By analyzing existing cross correlation between China Merchants Bank and Lutian Machinery Co, you can compare the effects of market volatilities on China Merchants and Lutian Machinery 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 Lutian Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Lutian Machinery.
Diversification Opportunities for China Merchants and Lutian Machinery
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Lutian is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery 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 Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of China Merchants i.e., China Merchants and Lutian Machinery go up and down completely randomly.
Pair Corralation between China Merchants and Lutian Machinery
Assuming the 90 days trading horizon China Merchants Bank is expected to under-perform the Lutian Machinery. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Bank is 2.05 times less risky than Lutian Machinery. The stock trades about -0.18 of its potential returns per unit of risk. The Lutian Machinery Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,410 in Lutian Machinery Co on August 29, 2024 and sell it today you would earn a total of 105.00 from holding Lutian Machinery Co or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Lutian Machinery Co
Performance |
| Timeline |
| China Merchants Bank |
| Lutian Machinery |
China Merchants and Lutian Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Lutian Machinery
The main advantage of trading using opposite China Merchants and Lutian Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Lutian Machinery 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 Lutian Machinery will offset losses from the drop in Lutian Machinery's long position.| China Merchants vs. Songz Automobile Air | China Merchants vs. Nanjing Putian Telecommunications | China Merchants vs. State Grid InformationCommunication | China Merchants vs. Ciwen Media Co |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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