Correlation Between Canadian Western and China Merchants
Can any of the company-specific risk be diversified away by investing in both Canadian Western 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 Canadian Western and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Western Bank and China Merchants Bank, you can compare the effects of market volatilities on Canadian Western 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 Canadian Western with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Western and China Merchants.
Diversification Opportunities for Canadian Western and China Merchants
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Canadian and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Western Bank 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 Canadian Western 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 Canadian Western Bank 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 Canadian Western i.e., Canadian Western and China Merchants go up and down completely randomly.
Pair Corralation between Canadian Western and China Merchants
Assuming the 90 days horizon Canadian Western is expected to generate 1.76 times less return on investment than China Merchants. But when comparing it to its historical volatility, Canadian Western Bank is 7.37 times less risky than China Merchants. It trades about 0.3 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,979 in China Merchants Bank on August 31, 2024 and sell it today you would earn a total of 296.00 from holding China Merchants Bank or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Western Bank vs. China Merchants Bank
Performance |
| Timeline |
| Canadian Western Bank |
| China Merchants Bank |
Canadian Western and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Western and China Merchants
The main advantage of trading using opposite Canadian Western and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Western 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.| Canadian Western vs. China Merchants Bank | Canadian Western vs. Nordea Bank Abp | Canadian Western vs. DBS Group Holdings | Canadian Western vs. Tompkins Financial |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |