Correlation Between China Merchants and United Overseas
Can any of the company-specific risk be diversified away by investing in both China Merchants and United Overseas 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 United Overseas 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 United Overseas Bank, you can compare the effects of market volatilities on China Merchants and United Overseas 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 United Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and United Overseas.
Diversification Opportunities for China Merchants and United Overseas
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and United is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of China Merchants i.e., China Merchants and United Overseas go up and down completely randomly.
Pair Corralation between China Merchants and United Overseas
Assuming the 90 days horizon China Merchants Bank is expected to under-perform the United Overseas. But the stock apears to be less risky and, when comparing its historical volatility, China Merchants Bank is 1.0 times less risky than United Overseas. The stock trades about -0.1 of its potential returns per unit of risk. The United Overseas Bank is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,250 in United Overseas Bank on September 6, 2024 and sell it today you would earn a total of 330.00 from holding United Overseas Bank or generate 14.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Merchants Bank vs. United Overseas Bank
Performance |
| Timeline |
| China Merchants Bank |
| United Overseas Bank |
China Merchants and United Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and United Overseas
The main advantage of trading using opposite China Merchants and United Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, United Overseas 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 United Overseas will offset losses from the drop in United Overseas' long position.| China Merchants vs. Cass Information Systems | China Merchants vs. DOCDATA | China Merchants vs. MICRONIC MYDATA | China Merchants vs. TIANDE CHEMICAL |
| United Overseas vs. Electronic Arts | United Overseas vs. Richardson Electronics | United Overseas vs. KIMBALL ELECTRONICS | United Overseas vs. CHIBA BANK |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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