Correlation Between China Merchants and Farmers Bancorp
Can any of the company-specific risk be diversified away by investing in both China Merchants and Farmers Bancorp 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 Farmers Bancorp 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 Farmers Bancorp, you can compare the effects of market volatilities on China Merchants and Farmers Bancorp 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 Farmers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Farmers Bancorp.
Diversification Opportunities for China Merchants and Farmers Bancorp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Farmers is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp 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 Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of China Merchants i.e., China Merchants and Farmers Bancorp go up and down completely randomly.
Pair Corralation between China Merchants and Farmers Bancorp
Assuming the 90 days horizon China Merchants Bank is expected to generate 4.79 times more return on investment than Farmers Bancorp. However, China Merchants is 4.79 times more volatile than Farmers Bancorp. It trades about 0.1 of its potential returns per unit of risk. Farmers Bancorp is currently generating about 0.12 per unit of risk. If you would invest 446.00 in China Merchants Bank on November 28, 2024 and sell it today you would earn a total of 41.00 from holding China Merchants Bank or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
China Merchants Bank vs. Farmers Bancorp
Performance |
| Timeline |
| China Merchants Bank |
| Farmers Bancorp |
China Merchants and Farmers Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Farmers Bancorp
The main advantage of trading using opposite China Merchants and Farmers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Farmers Bancorp 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 Farmers Bancorp will offset losses from the drop in Farmers Bancorp'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 |
| Farmers Bancorp vs. First Farmers Financial | Farmers Bancorp vs. Farmers Merchants Bancorp | Farmers Bancorp vs. Lakeland Financial | Farmers Bancorp vs. Eagle Financial Services |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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