Correlation Between Commerzbank and Hang Seng

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

By analyzing existing cross correlation between Commerzbank AG and Hang Seng Bank, you can compare the effects of market volatilities on Commerzbank and Hang Seng 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 Commerzbank with a short position of Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Hang Seng.

Diversification Opportunities for Commerzbank and Hang Seng

0.92

Correlation Coefficient

Commerzbank  Hang Seng

Almost no diversification

The 3 months correlation between Commerzbank and Hang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and Commerzbank 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 Commerzbank AG are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Commerzbank i.e., Commerzbank and Hang Seng go up and down completely randomly.

Pair Corralation between Commerzbank and Hang Seng

Assuming the 90 days horizon Commerzbank AG is expected to generate 1.94 times more return on investment than Hang Seng. However, Commerzbank is 1.94 times more volatile than Hang Seng Bank. It trades about 0.24 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.14 per unit of risk. If you would invest  1,545  in Commerzbank AG on December 30, 2024 and sell it today you would earn a total of  915.00  from holding Commerzbank AG or generate 59.22% return on investment over 90 days.

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

Commerzbank AG  vs.  Hang Seng Bank

Commerzbank AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Commerzbank reported solid returns over the last few months and may actually be approaching a breakup point.

Hang Seng Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commerzbank and Hang Seng

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

The idea behind Commerzbank AG and Hang Seng Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.