Correlation Between China Citic and China Merchants
Can any of the company-specific risk be diversified away by investing in both China Citic 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 China Citic and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Citic Bank and China Merchants Bank, you can compare the effects of market volatilities on China Citic 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 China Citic with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Citic and China Merchants.
Diversification Opportunities for China Citic and China Merchants
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Citic 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 China Citic 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 Citic 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 China Citic i.e., China Citic and China Merchants go up and down completely randomly.
Pair Corralation between China Citic and China Merchants
Assuming the 90 days horizon China Citic Bank is expected to generate 0.43 times more return on investment than China Merchants. However, China Citic Bank is 2.3 times less risky than China Merchants. It trades about 0.06 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.02 per unit of risk. If you would invest 677.00 in China Citic Bank on August 27, 2024 and sell it today you would earn a total of 483.00 from holding China Citic Bank or generate 71.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 68.75% |
| Values | Daily Returns |
China Citic Bank vs. China Merchants Bank
Performance |
| Timeline |
| China Citic Bank |
| China Merchants Bank |
China Citic and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Citic and China Merchants
The main advantage of trading using opposite China Citic and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Citic 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.| China Citic vs. China Everbright Bank | China Citic vs. China Merchants Bank | China Citic vs. Postal Savings Bank | China Citic vs. China Merchants Bank |
| China Merchants vs. China Everbright Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank | China Merchants vs. China Merchants 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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