Correlation Between China Merchants and Eastern Michigan
Can any of the company-specific risk be diversified away by investing in both China Merchants and Eastern Michigan 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 Eastern Michigan 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 Eastern Michigan Financial, you can compare the effects of market volatilities on China Merchants and Eastern Michigan 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 Eastern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Eastern Michigan.
Diversification Opportunities for China Merchants and Eastern Michigan
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Eastern is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Eastern Michigan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Michigan Fin 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 Eastern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Michigan Fin has no effect on the direction of China Merchants i.e., China Merchants and Eastern Michigan go up and down completely randomly.
Pair Corralation between China Merchants and Eastern Michigan
Assuming the 90 days horizon China Merchants is expected to generate 5.25 times less return on investment than Eastern Michigan. But when comparing it to its historical volatility, China Merchants Bank is 1.67 times less risky than Eastern Michigan. It trades about 0.02 of its potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,348 in Eastern Michigan Financial on November 1, 2024 and sell it today you would earn a total of 1,536 from holding Eastern Michigan Financial or generate 65.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.47% |
| Values | Daily Returns |
China Merchants Bank vs. Eastern Michigan Financial
Performance |
| Timeline |
| China Merchants Bank |
| Eastern Michigan Fin |
China Merchants and Eastern Michigan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Eastern Michigan
The main advantage of trading using opposite China Merchants and Eastern Michigan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Eastern Michigan 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 Eastern Michigan will offset losses from the drop in Eastern Michigan'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 |
| Eastern Michigan vs. Commercial National Financial | Eastern Michigan vs. Mifflinburg Bancorp | Eastern Michigan vs. Apollo Bancorp | Eastern Michigan vs. Community Bankers |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |