Correlation Between China Merchants and AIB Group
Can any of the company-specific risk be diversified away by investing in both China Merchants and AIB Group 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 AIB Group 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 AIB Group plc, you can compare the effects of market volatilities on China Merchants and AIB Group 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 AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and AIB Group.
Diversification Opportunities for China Merchants and AIB Group
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and AIB is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of China Merchants i.e., China Merchants and AIB Group go up and down completely randomly.
Pair Corralation between China Merchants and AIB Group
Assuming the 90 days horizon China Merchants is expected to generate 3.16 times less return on investment than AIB Group. In addition to that, China Merchants is 1.07 times more volatile than AIB Group plc. It trades about 0.12 of its total potential returns per unit of risk. AIB Group plc is currently generating about 0.41 per unit of volatility. If you would invest 1,200 in AIB Group plc on December 1, 2024 and sell it today you would earn a total of 184.00 from holding AIB Group plc or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. AIB Group plc
Performance |
| Timeline |
| China Merchants Bank |
| AIB Group plc |
China Merchants and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and AIB Group
The main advantage of trading using opposite China Merchants and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, AIB Group 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 AIB Group will offset losses from the drop in AIB Group's long position.| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
| AIB Group vs. HDFC Bank Limited | AIB Group vs. China Merchants Bank | AIB Group vs. China Merchants Bank | AIB Group vs. Fifth Third Bancorp |
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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