Correlation Between Lendlease and China Merchants
Can any of the company-specific risk be diversified away by investing in both Lendlease 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 Lendlease and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lendlease Group and China Merchants Bank, you can compare the effects of market volatilities on Lendlease 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 Lendlease with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and China Merchants.
Diversification Opportunities for Lendlease and China Merchants
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lendlease and China is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group 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 Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and China Merchants go up and down completely randomly.
Pair Corralation between Lendlease and China Merchants
Assuming the 90 days trading horizon Lendlease is expected to generate 35.24 times less return on investment than China Merchants. But when comparing it to its historical volatility, Lendlease Group is 1.14 times less risky than China Merchants. It trades about 0.0 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 455.00 in China Merchants Bank on September 12, 2024 and sell it today you would earn a total of 13.00 from holding China Merchants Bank or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lendlease Group vs. China Merchants Bank
Performance |
| Timeline |
| Lendlease Group |
| China Merchants Bank |
Lendlease and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lendlease and China Merchants
The main advantage of trading using opposite Lendlease and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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.The idea behind Lendlease Group and China Merchants Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Merchants vs. HDFC Bank Limited | China Merchants vs. ICICI Bank Limited | China Merchants vs. PT Bank Central | China Merchants vs. DBS Group Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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