Correlation Between China Merchants and Truxton

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

Diversification Opportunities for China Merchants and Truxton

-0.55

Correlation Coefficient

China Merchants  Truxton

Excellent diversification

The 3 months correlation between China and Truxton is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Truxton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truxton 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 Truxton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truxton has no effect on the direction of China Merchants i.e., China Merchants and Truxton go up and down completely randomly.

Pair Corralation between China Merchants and Truxton

Assuming the 90 days horizon China Merchants Bank is expected to generate 2.38 times more return on investment than Truxton. However, China Merchants is 2.38 times more volatile than Truxton. It trades about 0.01 of its potential returns per unit of risk. Truxton is currently generating about 0.03 per unit of risk. If you would invest  634.00  in China Merchants Bank on October 10, 2024 and sell it today you would lose (136.00) from holding China Merchants Bank or give up 21.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.8%
Values	Daily Returns

China Merchants Bank  vs.  Truxton

China Merchants Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, China Merchants is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Truxton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truxton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Truxton is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Merchants and Truxton

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

The idea behind China Merchants Bank and Truxton 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.