Correlation Between China Merchants and Bank of Ireland Group PLC
Can any of the company-specific risk be diversified away by investing in both China Merchants and Bank of Ireland Group PLC 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 Bank of Ireland Group PLC 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 Bank of Ireland, you can compare the effects of market volatilities on China Merchants and Bank of Ireland Group PLC 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 Bank of Ireland Group PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Bank of Ireland Group PLC.
Diversification Opportunities for China Merchants and Bank of Ireland Group PLC
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Bank is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland Group PLC 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 Bank of Ireland Group PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland Group PLC has no effect on the direction of China Merchants i.e., China Merchants and Bank of Ireland Group PLC go up and down completely randomly.
Pair Corralation between China Merchants and Bank of Ireland Group PLC
Assuming the 90 days horizon China Merchants Bank is expected to under-perform the Bank of Ireland Group PLC. In addition to that, China Merchants is 1.1 times more volatile than Bank of Ireland. It trades about -0.08 of its total potential returns per unit of risk. Bank of Ireland is currently generating about 0.26 per unit of volatility. If you would invest 900.00 in Bank of Ireland on October 28, 2024 and sell it today you would earn a total of 115.00 from holding Bank of Ireland or generate 12.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Bank of Ireland
Performance |
| Timeline |
| China Merchants Bank |
| Bank of Ireland Group PLC |
China Merchants and Bank of Ireland Group PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Bank of Ireland Group PLC
The main advantage of trading using opposite China Merchants and Bank of Ireland Group PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Bank of Ireland Group PLC 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 Bank of Ireland Group PLC will offset losses from the drop in Bank of Ireland Group PLC'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 |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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