Correlation Between MYFAIR GOLD and China Merchants
Can any of the company-specific risk be diversified away by investing in both MYFAIR GOLD and China Merchants 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 MYFAIR GOLD and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MYFAIR GOLD P and China Merchants Bank, you can compare the effects of market volatilities on MYFAIR GOLD and China Merchants 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 MYFAIR GOLD with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of MYFAIR GOLD and China Merchants.
Diversification Opportunities for MYFAIR GOLD and China Merchants
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MYFAIR and China is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MYFAIR GOLD P and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and MYFAIR GOLD 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 MYFAIR GOLD P are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of MYFAIR GOLD i.e., MYFAIR GOLD and China Merchants go up and down completely randomly.
Pair Corralation between MYFAIR GOLD and China Merchants
Assuming the 90 days horizon MYFAIR GOLD is expected to generate 27.4 times less return on investment than China Merchants. But when comparing it to its historical volatility, MYFAIR GOLD P is 2.33 times less risky than China Merchants. It trades about 0.01 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 206.00 in China Merchants Bank on September 3, 2024 and sell it today you would earn a total of 217.00 from holding China Merchants Bank or generate 105.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MYFAIR GOLD P vs. China Merchants Bank
Performance |
| Timeline |
| MYFAIR GOLD P |
| China Merchants Bank |
MYFAIR GOLD and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MYFAIR GOLD and China Merchants
The main advantage of trading using opposite MYFAIR GOLD and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYFAIR GOLD position performs unexpectedly, China Merchants 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 Merchants will offset losses from the drop in China Merchants' long position.| MYFAIR GOLD vs. ECHO INVESTMENT ZY | MYFAIR GOLD vs. Luckin Coffee | MYFAIR GOLD vs. CHIBA BANK | MYFAIR GOLD vs. Commonwealth Bank of |
| China Merchants vs. Air New Zealand | China Merchants vs. MYFAIR GOLD P | China Merchants vs. SEI INVESTMENTS | China Merchants vs. ECHO INVESTMENT ZY |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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