Correlation Between China Merchants and TriCo Bancshares
Can any of the company-specific risk be diversified away by investing in both China Merchants and TriCo Bancshares 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 TriCo Bancshares 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 TriCo Bancshares, you can compare the effects of market volatilities on China Merchants and TriCo Bancshares 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 TriCo Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and TriCo Bancshares.
Diversification Opportunities for China Merchants and TriCo Bancshares
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and TriCo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares 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 TriCo Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriCo Bancshares has no effect on the direction of China Merchants i.e., China Merchants and TriCo Bancshares go up and down completely randomly.
Pair Corralation between China Merchants and TriCo Bancshares
Assuming the 90 days horizon China Merchants Bank is expected to generate 1.27 times more return on investment than TriCo Bancshares. However, China Merchants is 1.27 times more volatile than TriCo Bancshares. It trades about 0.28 of its potential returns per unit of risk. TriCo Bancshares is currently generating about 0.06 per unit of risk. If you would invest 2,489 in China Merchants Bank on November 4, 2024 and sell it today you would earn a total of 256.00 from holding China Merchants Bank or generate 10.29% 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. TriCo Bancshares
Performance |
| Timeline |
| China Merchants Bank |
| TriCo Bancshares |
China Merchants and TriCo Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and TriCo Bancshares
The main advantage of trading using opposite China Merchants and TriCo Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, TriCo Bancshares 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 TriCo Bancshares will offset losses from the drop in TriCo Bancshares' long position.| China Merchants vs. Banco De Chile | China Merchants vs. Banco Santander Brasil | China Merchants vs. CrossFirst Bankshares | China Merchants vs. Banco Bradesco SA |
| TriCo Bancshares vs. First Northwest Bancorp | TriCo Bancshares vs. Community West Bancshares | TriCo Bancshares vs. First Financial Northwest | TriCo Bancshares vs. Great Southern Bancorp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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