Correlation Between China Merchants and 1ST SUMMIT
Can any of the company-specific risk be diversified away by investing in both China Merchants and 1ST SUMMIT 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 1ST SUMMIT 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 1ST SUMMIT BANCORP, you can compare the effects of market volatilities on China Merchants and 1ST SUMMIT 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 1ST SUMMIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and 1ST SUMMIT.
Diversification Opportunities for China Merchants and 1ST SUMMIT
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and 1ST is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and 1ST SUMMIT BANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1ST SUMMIT BANCORP 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 1ST SUMMIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1ST SUMMIT BANCORP has no effect on the direction of China Merchants i.e., China Merchants and 1ST SUMMIT go up and down completely randomly.
Pair Corralation between China Merchants and 1ST SUMMIT
Assuming the 90 days horizon China Merchants Bank is expected to generate 0.93 times more return on investment than 1ST SUMMIT. However, China Merchants Bank is 1.08 times less risky than 1ST SUMMIT. It trades about 0.06 of its potential returns per unit of risk. 1ST SUMMIT BANCORP is currently generating about -0.13 per unit of risk. If you would invest 1,686 in China Merchants Bank on August 29, 2024 and sell it today you would earn a total of 514.00 from holding China Merchants Bank or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
China Merchants Bank vs. 1ST SUMMIT BANCORP
Performance |
| Timeline |
| China Merchants Bank |
| 1ST SUMMIT BANCORP |
China Merchants and 1ST SUMMIT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and 1ST SUMMIT
The main advantage of trading using opposite China Merchants and 1ST SUMMIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, 1ST SUMMIT 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 1ST SUMMIT will offset losses from the drop in 1ST SUMMIT'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 |
| 1ST SUMMIT vs. Apollo Bancorp | 1ST SUMMIT vs. Oregon Pacific Bancorp | 1ST SUMMIT vs. The Farmers Bank | 1ST SUMMIT 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 Stocks Directory module to find actively traded stocks across global markets.
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