Correlation Between China Merchants and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both China Merchants and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp PR, you can compare the effects of market volatilities on China Merchants and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Merchants Bancorp.
Diversification Opportunities for China Merchants and Merchants Bancorp
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Merchants is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of China Merchants i.e., China Merchants and Merchants Bancorp go up and down completely randomly.
Pair Corralation between China Merchants and Merchants Bancorp
If you would invest 2,290 in Merchants Bancorp PR on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Merchants Bancorp PR or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China Merchants Bank vs. Merchants Bancorp PR
Performance |
| Timeline |
| China Merchants Bank |
| Merchants Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Merchants and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Merchants Bancorp
The main advantage of trading using opposite China Merchants and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp'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 |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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