Correlation Between China Merchants and Overseas Chinese
Can any of the company-specific risk be diversified away by investing in both China Merchants and Overseas Chinese 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 Overseas Chinese 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 Overseas Chinese Banking, you can compare the effects of market volatilities on China Merchants and Overseas Chinese 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 Overseas Chinese. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Overseas Chinese.
Diversification Opportunities for China Merchants and Overseas Chinese
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Overseas is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Overseas Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Chinese Banking 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 Overseas Chinese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Chinese Banking has no effect on the direction of China Merchants i.e., China Merchants and Overseas Chinese go up and down completely randomly.
Pair Corralation between China Merchants and Overseas Chinese
Assuming the 90 days horizon China Merchants Bank is expected to generate 6.66 times more return on investment than Overseas Chinese. However, China Merchants is 6.66 times more volatile than Overseas Chinese Banking. It trades about 0.03 of its potential returns per unit of risk. Overseas Chinese Banking is currently generating about 0.07 per unit of risk. If you would invest 650.00 in China Merchants Bank on October 21, 2024 and sell it today you would lose (204.00) from holding China Merchants Bank or give up 31.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 68.75% |
| Values | Daily Returns |
China Merchants Bank vs. Overseas Chinese Banking
Performance |
| Timeline |
| China Merchants Bank |
| Overseas Chinese Banking |
China Merchants and Overseas Chinese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Overseas Chinese
The main advantage of trading using opposite China Merchants and Overseas Chinese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Overseas Chinese 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 Overseas Chinese will offset losses from the drop in Overseas Chinese'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 |
| Overseas Chinese vs. Swedbank AB | Overseas Chinese vs. KBC Groep NV | Overseas Chinese vs. Nordea Bank Abp | Overseas Chinese vs. DBS Group Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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