Correlation Between Resona Holdings and China Merchants
Can any of the company-specific risk be diversified away by investing in both Resona Holdings 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 Resona Holdings and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resona Holdings and China Merchants Bank, you can compare the effects of market volatilities on Resona Holdings 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 Resona Holdings with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resona Holdings and China Merchants.
Diversification Opportunities for Resona Holdings and China Merchants
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Resona and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Resona Holdings 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 Resona Holdings 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 Resona Holdings 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 Resona Holdings i.e., Resona Holdings and China Merchants go up and down completely randomly.
Pair Corralation between Resona Holdings and China Merchants
Assuming the 90 days horizon Resona Holdings is expected to generate 2.06 times less return on investment than China Merchants. But when comparing it to its historical volatility, Resona Holdings is 2.22 times less risky than China Merchants. It trades about 0.08 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 186.00 in China Merchants Bank on September 1, 2024 and sell it today you would earn a total of 237.00 from holding China Merchants Bank or generate 127.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Resona Holdings vs. China Merchants Bank
Performance |
| Timeline |
| Resona Holdings |
| China Merchants Bank |
Resona Holdings and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resona Holdings and China Merchants
The main advantage of trading using opposite Resona Holdings and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resona Holdings 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.| Resona Holdings vs. Singapore Reinsurance | Resona Holdings vs. United Insurance Holdings | Resona Holdings vs. Reinsurance Group of | Resona Holdings vs. MI Homes |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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