Correlation Between Comerica and China Merchants
Can any of the company-specific risk be diversified away by investing in both Comerica and China Merchants 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 Comerica and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Comerica and China Merchants Bank, you can compare the effects of market volatilities on Comerica and China Merchants 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 Comerica with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comerica and China Merchants.
Diversification Opportunities for Comerica and China Merchants
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Comerica and China is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and Comerica 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 Comerica are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Comerica i.e., Comerica and China Merchants go up and down completely randomly.
Pair Corralation between Comerica and China Merchants
Considering the 90-day investment horizon Comerica is expected to generate 1.86 times less return on investment than China Merchants. But when comparing it to its historical volatility, Comerica is 2.06 times less risky than China Merchants. It trades about 0.15 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,855 in China Merchants Bank on September 12, 2024 and sell it today you would earn a total of 692.00 from holding China Merchants Bank or generate 37.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Comerica vs. China Merchants Bank
Performance |
| Timeline |
| Comerica |
| China Merchants Bank |
Comerica and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Comerica and China Merchants
The main advantage of trading using opposite Comerica and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comerica position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| Comerica vs. JPMorgan Chase Co | Comerica vs. Citigroup | Comerica vs. Wells Fargo | Comerica vs. Toronto Dominion Bank |
| China Merchants vs. PT Bank Rakyat | China Merchants vs. Bank Mandiri Persero | China Merchants vs. Morningstar Unconstrained Allocation | China Merchants vs. Bondbloxx ETF Trust |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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