Correlation Between Boeing and China Merchants
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and China Merchants Bank, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and China Merchants.
Diversification Opportunities for Boeing and China Merchants
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Boeing and China is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing 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 Boeing 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 The Boeing 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 Boeing i.e., Boeing and China Merchants go up and down completely randomly.
Pair Corralation between Boeing and China Merchants
Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.56 times less risky than China Merchants. The stock trades about -0.06 of its potential returns per unit of risk. The China Merchants Bank is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,212 in China Merchants Bank on August 24, 2024 and sell it today you would earn a total of 106.00 from holding China Merchants Bank or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. China Merchants Bank
Performance |
| Timeline |
| Boeing |
| China Merchants Bank |
Boeing and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and China Merchants
The main advantage of trading using opposite Boeing and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.| Boeing vs. Small Cap Core | Boeing vs. Freedom Holding Corp | Boeing vs. Gfl Environmental Holdings | Boeing vs. Growth Fund Of |
| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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