Correlation Between China Merchants and China Everbright
Can any of the company-specific risk be diversified away by investing in both China Merchants and China Everbright 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 China Everbright 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 China Everbright Bank, you can compare the effects of market volatilities on China Merchants and China Everbright 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 China Everbright. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and China Everbright.
Diversification Opportunities for China Merchants and China Everbright
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and China is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank 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 China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of China Merchants i.e., China Merchants and China Everbright go up and down completely randomly.
Pair Corralation between China Merchants and China Everbright
If you would invest 39.00 in China Everbright Bank on August 24, 2024 and sell it today you would earn a total of 0.00 from holding China Everbright Bank or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. China Everbright Bank
Performance |
| Timeline |
| China Merchants Bank |
| China Everbright Bank |
China Merchants and China Everbright Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and China Everbright
The main advantage of trading using opposite China Merchants and China Everbright positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, China Everbright 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 China Everbright will offset losses from the drop in China Everbright'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 |
| China Everbright vs. China Merchants Bank | China Everbright vs. China Merchants Bank | China Everbright vs. Postal Savings Bank | China Everbright 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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