Correlation Between China Merchants and Mars Bancorp

Can any of the company-specific risk be diversified away by investing in both China Merchants and Mars Bancorp 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 Mars Bancorp 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 Mars Bancorp, you can compare the effects of market volatilities on China Merchants and Mars Bancorp 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 Mars Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Mars Bancorp.

Diversification Opportunities for China Merchants and Mars Bancorp

-0.58

Correlation Coefficient

China Merchants  Mars Bancorp

Excellent diversification

The 3 months correlation between China and Mars is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Mars Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mars Bancorp 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 Mars Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mars Bancorp has no effect on the direction of China Merchants i.e., China Merchants and Mars Bancorp go up and down completely randomly.

Pair Corralation between China Merchants and Mars Bancorp

If you would invest  424.00  in China Merchants Bank on September 3, 2024 and sell it today you would earn a total of  46.00  from holding China Merchants Bank or generate 10.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

China Merchants Bank  vs.  Mars Bancorp

China Merchants Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Mars Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mars Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Mars Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with China Merchants and Mars Bancorp

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

The idea behind China Merchants Bank and Mars Bancorp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.