Correlation Between China Merchants and InBankshares Corp
Can any of the company-specific risk be diversified away by investing in both China Merchants and InBankshares Corp 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 InBankshares Corp 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 InBankshares Corp, you can compare the effects of market volatilities on China Merchants and InBankshares Corp 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 InBankshares Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and InBankshares Corp.
Diversification Opportunities for China Merchants and InBankshares Corp
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and InBankshares is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and InBankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBankshares Corp 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 InBankshares Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBankshares Corp has no effect on the direction of China Merchants i.e., China Merchants and InBankshares Corp go up and down completely randomly.
Pair Corralation between China Merchants and InBankshares Corp
Assuming the 90 days horizon China Merchants Bank is expected to generate 2.5 times more return on investment than InBankshares Corp. However, China Merchants is 2.5 times more volatile than InBankshares Corp. It trades about 0.01 of its potential returns per unit of risk. InBankshares Corp is currently generating about 0.01 per unit of risk. If you would invest 2,351 in China Merchants Bank on September 3, 2024 and sell it today you would lose (64.00) from holding China Merchants Bank or give up 2.72% 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. InBankshares Corp
Performance |
| Timeline |
| China Merchants Bank |
| InBankshares Corp |
China Merchants and InBankshares Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and InBankshares Corp
The main advantage of trading using opposite China Merchants and InBankshares Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, InBankshares Corp 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 InBankshares Corp will offset losses from the drop in InBankshares Corp's long position.| China Merchants vs. First Hawaiian | China Merchants vs. Central Pacific Financial | China Merchants vs. Territorial Bancorp | China Merchants vs. Comerica |
| InBankshares Corp vs. First Hawaiian | InBankshares Corp vs. Central Pacific Financial | InBankshares Corp vs. Territorial Bancorp | InBankshares Corp vs. Comerica |
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 CEOs Directory module to screen CEOs from public companies around the world.
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