Correlation Between China Merchants and Banco Do
Can any of the company-specific risk be diversified away by investing in both China Merchants and Banco Do 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 Merchants and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Merchants Bank and Banco Do Brasil, you can compare the effects of market volatilities on China Merchants and Banco Do 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 Merchants with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Banco Do.
Diversification Opportunities for China Merchants and Banco Do
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Banco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and China Merchants 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 Merchants Bank are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of China Merchants i.e., China Merchants and Banco Do go up and down completely randomly.
Pair Corralation between China Merchants and Banco Do
Assuming the 90 days horizon China Merchants Bank is expected to generate 5.64 times more return on investment than Banco Do. However, China Merchants is 5.64 times more volatile than Banco Do Brasil. It trades about 0.09 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.17 per unit of risk. If you would invest 380.00 in China Merchants Bank on August 28, 2024 and sell it today you would earn a total of 90.00 from holding China Merchants Bank or generate 23.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Banco Do Brasil
Performance |
| Timeline |
| China Merchants Bank |
| Banco Do Brasil |
China Merchants and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Banco Do
The main advantage of trading using opposite China Merchants and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Banco Do 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 Banco Do will offset losses from the drop in Banco Do's long position.| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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