Correlation Between China Merchants and Bank Rakyat
Can any of the company-specific risk be diversified away by investing in both China Merchants and Bank Rakyat 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 Bank Rakyat 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 Bank Rakyat, you can compare the effects of market volatilities on China Merchants and Bank Rakyat 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 Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Bank Rakyat.
Diversification Opportunities for China Merchants and Bank Rakyat
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Bank is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat 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 Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of China Merchants i.e., China Merchants and Bank Rakyat go up and down completely randomly.
Pair Corralation between China Merchants and Bank Rakyat
Assuming the 90 days horizon China Merchants Bank is expected to under-perform the Bank Rakyat. In addition to that, China Merchants is 1.43 times more volatile than Bank Rakyat. It trades about -0.25 of its total potential returns per unit of risk. Bank Rakyat is currently generating about -0.18 per unit of volatility. If you would invest 1,504 in Bank Rakyat on August 28, 2024 and sell it today you would lose (108.00) from holding Bank Rakyat or give up 7.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Bank Rakyat
Performance |
| Timeline |
| China Merchants Bank |
| Bank Rakyat |
China Merchants and Bank Rakyat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Bank Rakyat
The main advantage of trading using opposite China Merchants and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Bank Rakyat 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 Bank Rakyat will offset losses from the drop in Bank Rakyat'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 |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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