Correlation Between China Merchants and Commercial International
Can any of the company-specific risk be diversified away by investing in both China Merchants and Commercial International 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 Commercial International 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 Commercial International Bank, you can compare the effects of market volatilities on China Merchants and Commercial International 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 Commercial International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Commercial International.
Diversification Opportunities for China Merchants and Commercial International
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Commercial is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Commercial International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial International 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 Commercial International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial International has no effect on the direction of China Merchants i.e., China Merchants and Commercial International go up and down completely randomly.
Pair Corralation between China Merchants and Commercial International
Assuming the 90 days horizon China Merchants is expected to generate 1.93 times less return on investment than Commercial International. In addition to that, China Merchants is 1.14 times more volatile than Commercial International Bank. It trades about 0.02 of its total potential returns per unit of risk. Commercial International Bank is currently generating about 0.04 per unit of volatility. If you would invest 116.00 in Commercial International Bank on August 31, 2024 and sell it today you would earn a total of 36.00 from holding Commercial International Bank or generate 31.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. Commercial International Bank
Performance |
| Timeline |
| China Merchants Bank |
| Commercial International |
China Merchants and Commercial International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Commercial International
The main advantage of trading using opposite China Merchants and Commercial International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Commercial International 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 Commercial International will offset losses from the drop in Commercial International'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 |
| Commercial International vs. Bank Mandiri Persero | Commercial International vs. Turkiye Garanti Bankasi | Commercial International vs. BOC Hong Kong | Commercial International vs. Hang Seng 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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