Correlation Between Ameriprise Financial and CHINA MERCHANTS
Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial 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 Ameriprise Financial and CHINA MERCHANTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriprise Financial and CHINA MERCHANTS, you can compare the effects of market volatilities on Ameriprise Financial 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 Ameriprise Financial with a short position of CHINA MERCHANTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and CHINA MERCHANTS.
Diversification Opportunities for Ameriprise Financial and CHINA MERCHANTS
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ameriprise and CHINA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and CHINA MERCHANTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA MERCHANTS and Ameriprise Financial 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 Ameriprise Financial 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 has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and CHINA MERCHANTS go up and down completely randomly.
Pair Corralation between Ameriprise Financial and CHINA MERCHANTS
Assuming the 90 days horizon Ameriprise Financial is expected to generate 1.71 times more return on investment than CHINA MERCHANTS. However, Ameriprise Financial is 1.71 times more volatile than CHINA MERCHANTS. It trades about 0.21 of its potential returns per unit of risk. CHINA MERCHANTS is currently generating about -0.04 per unit of risk. If you would invest 47,389 in Ameriprise Financial on August 30, 2024 and sell it today you would earn a total of 6,671 from holding Ameriprise Financial or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameriprise Financial vs. CHINA MERCHANTS
Performance |
| Timeline |
| Ameriprise Financial |
| CHINA MERCHANTS |
Ameriprise Financial and CHINA MERCHANTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameriprise Financial and CHINA MERCHANTS
The main advantage of trading using opposite Ameriprise Financial and CHINA MERCHANTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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's long position.The idea behind Ameriprise Financial and CHINA MERCHANTS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CHINA MERCHANTS vs. Zijin Mining Group | CHINA MERCHANTS vs. Harmony Gold Mining | CHINA MERCHANTS vs. Fast Retailing Co | CHINA MERCHANTS vs. RETAIL FOOD GROUP |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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