Correlation Between Fair Isaac and China Merchants
Can any of the company-specific risk be diversified away by investing in both Fair Isaac 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 Fair Isaac and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fair Isaac Corp and China Merchants Bank, you can compare the effects of market volatilities on Fair Isaac 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 Fair Isaac with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Isaac and China Merchants.
Diversification Opportunities for Fair Isaac and China Merchants
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fair and China is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac Corp 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 Fair Isaac 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 Fair Isaac Corp 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 Fair Isaac i.e., Fair Isaac and China Merchants go up and down completely randomly.
Pair Corralation between Fair Isaac and China Merchants
Assuming the 90 days trading horizon Fair Isaac is expected to generate 7.18 times less return on investment than China Merchants. But when comparing it to its historical volatility, Fair Isaac Corp is 1.3 times less risky than China Merchants. It trades about 0.01 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 441.00 in China Merchants Bank on October 31, 2024 and sell it today you would earn a total of 78.00 from holding China Merchants Bank or generate 17.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fair Isaac Corp vs. China Merchants Bank
Performance |
| Timeline |
| Fair Isaac Corp |
| China Merchants Bank |
Fair Isaac and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fair Isaac and China Merchants
The main advantage of trading using opposite Fair Isaac and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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.| Fair Isaac vs. SHIP HEALTHCARE HLDGINC | Fair Isaac vs. Cardinal Health | Fair Isaac vs. BOS BETTER ONLINE | Fair Isaac vs. EPSILON HEALTHCARE LTD |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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