Correlation Between China Minsheng and Industrial

Can any of the company-specific risk be diversified away by investing in both China Minsheng and Industrial 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 Minsheng and Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Minsheng Banking and Industrial and Commercial, you can compare the effects of market volatilities on China Minsheng and Industrial 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 Minsheng with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minsheng and Industrial.

Diversification Opportunities for China Minsheng and Industrial

0.77

Correlation Coefficient

China Minsheng  Industrial

Poor diversification

The 3 months correlation between China and Industrial is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding China Minsheng Banking and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and China Minsheng 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 Minsheng Banking are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of China Minsheng i.e., China Minsheng and Industrial go up and down completely randomly.

Pair Corralation between China Minsheng and Industrial

Assuming the 90 days trading horizon China Minsheng is expected to generate 3.14 times less return on investment than Industrial. But when comparing it to its historical volatility, China Minsheng Banking is 1.21 times less risky than Industrial. It trades about 0.06 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  613.00  in Industrial and Commercial on December 1, 2024 and sell it today you would earn a total of  74.00  from holding Industrial and Commercial or generate 12.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Minsheng Banking  vs.  Industrial and Commercial

China Minsheng Banking

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minsheng Banking are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Minsheng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Minsheng and Industrial

The main advantage of trading using opposite China Minsheng and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Minsheng position performs unexpectedly, Industrial 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 Industrial will offset losses from the drop in Industrial's long position.

The idea behind China Minsheng Banking and Industrial and Commercial 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.