Correlation Between China Merchants and Lifestore Financial
Can any of the company-specific risk be diversified away by investing in both China Merchants and Lifestore Financial 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 Lifestore Financial 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 Lifestore Financial Group, you can compare the effects of market volatilities on China Merchants and Lifestore Financial 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 Lifestore Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Lifestore Financial.
Diversification Opportunities for China Merchants and Lifestore Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Lifestore is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Lifestore Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestore Financial 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 Lifestore Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestore Financial has no effect on the direction of China Merchants i.e., China Merchants and Lifestore Financial go up and down completely randomly.
Pair Corralation between China Merchants and Lifestore Financial
Assuming the 90 days horizon China Merchants Bank is expected to generate 1.96 times more return on investment than Lifestore Financial. However, China Merchants is 1.96 times more volatile than Lifestore Financial Group. It trades about 0.02 of its potential returns per unit of risk. Lifestore Financial Group is currently generating about 0.01 per unit of risk. If you would invest 518.00 in China Merchants Bank on September 5, 2024 and sell it today you would lose (48.00) from holding China Merchants Bank or give up 9.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 78.84% |
| Values | Daily Returns |
China Merchants Bank vs. Lifestore Financial Group
Performance |
| Timeline |
| China Merchants Bank |
| Lifestore Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Merchants and Lifestore Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Lifestore Financial
The main advantage of trading using opposite China Merchants and Lifestore Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Lifestore Financial 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 Lifestore Financial will offset losses from the drop in Lifestore Financial's long position.| China Merchants vs. First Hawaiian | China Merchants vs. Central Pacific Financial | China Merchants vs. Territorial Bancorp | China Merchants vs. Comerica |
| Lifestore Financial vs. NETGEAR | Lifestore Financial vs. Marfrig Global Foods | Lifestore Financial vs. Bridgford Foods | Lifestore Financial vs. Uber Technologies |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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