Correlation Between China Merchants and Swedbank
Can any of the company-specific risk be diversified away by investing in both China Merchants and Swedbank 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 Swedbank 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 Swedbank AB, you can compare the effects of market volatilities on China Merchants and Swedbank 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 Swedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Swedbank.
Diversification Opportunities for China Merchants and Swedbank
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Swedbank is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB 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 Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of China Merchants i.e., China Merchants and Swedbank go up and down completely randomly.
Pair Corralation between China Merchants and Swedbank
Assuming the 90 days horizon China Merchants Bank is expected to generate 2.85 times more return on investment than Swedbank. However, China Merchants is 2.85 times more volatile than Swedbank AB. It trades about 0.03 of its potential returns per unit of risk. Swedbank AB is currently generating about 0.03 per unit of risk. If you would invest 438.00 in China Merchants Bank on August 28, 2024 and sell it today you would earn a total of 32.00 from holding China Merchants Bank or generate 7.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
China Merchants Bank vs. Swedbank AB
Performance |
| Timeline |
| China Merchants Bank |
| Swedbank AB |
China Merchants and Swedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Swedbank
The main advantage of trading using opposite China Merchants and Swedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Swedbank 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 Swedbank will offset losses from the drop in Swedbank'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 |
| Swedbank vs. Nordea Bank Abp | Swedbank vs. United Overseas Bank | Swedbank vs. KBC Groep NV | Swedbank vs. Bank Mandiri Persero |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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