Correlation Between China Merchants and Bank of the Philippine Is
Can any of the company-specific risk be diversified away by investing in both China Merchants and Bank of the Philippine Is 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 the Philippine Is 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 the, you can compare the effects of market volatilities on China Merchants and Bank of the Philippine Is 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 the Philippine Is. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Bank of the Philippine Is.
Diversification Opportunities for China Merchants and Bank of the Philippine Is
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Bank is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the Philippine Is 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 the Philippine Is. 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 the Philippine Is has no effect on the direction of China Merchants i.e., China Merchants and Bank of the Philippine Is go up and down completely randomly.
Pair Corralation between China Merchants and Bank of the Philippine Is
Assuming the 90 days horizon China Merchants Bank is expected to under-perform the Bank of the Philippine Is. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Merchants Bank is 1.04 times less risky than Bank of the Philippine Is. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Bank of the is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 4,745 in Bank of the on August 27, 2024 and sell it today you would lose (473.00) from holding Bank of the or give up 9.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Bank of the
Performance |
| Timeline |
| China Merchants Bank |
| Bank of the Philippine Is |
China Merchants and Bank of the Philippine Is Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Bank of the Philippine Is
The main advantage of trading using opposite China Merchants and Bank of the Philippine Is positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Bank of the Philippine Is 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 the Philippine Is will offset losses from the drop in Bank of the Philippine Is' 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 |
| Bank of the Philippine Is vs. BOC Hong Kong | Bank of the Philippine Is vs. China Merchants Bank | Bank of the Philippine Is vs. BDO Unibank ADR | Bank of the Philippine Is vs. United Security Bancshares |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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