Correlation Between Corporate Office and China Merchants
Can any of the company-specific risk be diversified away by investing in both Corporate Office 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 Corporate Office and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Office Properties and China Merchants Bank, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and China Merchants.
Diversification Opportunities for Corporate Office and China Merchants
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Corporate and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties 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 Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and China Merchants go up and down completely randomly.
Pair Corralation between Corporate Office and China Merchants
Assuming the 90 days horizon Corporate Office Properties is expected to generate 0.69 times more return on investment than China Merchants. However, Corporate Office Properties is 1.45 times less risky than China Merchants. It trades about 0.18 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.08 per unit of risk. If you would invest 2,940 in Corporate Office Properties on September 14, 2024 and sell it today you would earn a total of 160.00 from holding Corporate Office Properties or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corporate Office Properties vs. China Merchants Bank
Performance |
| Timeline |
| Corporate Office Pro |
| China Merchants Bank |
Corporate Office and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corporate Office and China Merchants
The main advantage of trading using opposite Corporate Office and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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.| Corporate Office vs. ORIX JREIT INC | Corporate Office vs. Superior Plus Corp | Corporate Office vs. SIVERS SEMICONDUCTORS AB | Corporate Office vs. Norsk Hydro ASA |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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