Correlation Between TMBThanachart Bank and China Merchants

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

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

Diversification Opportunities for TMBThanachart Bank and China Merchants

-0.32

Correlation Coefficient

TMBThanachart Bank  China Merchants

Very good diversification

The 3 months correlation between TMBThanachart and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding TMBThanachart Bank Public 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 TMBThanachart Bank 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 TMBThanachart Bank Public 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 TMBThanachart Bank i.e., TMBThanachart Bank and China Merchants go up and down completely randomly.

Pair Corralation between TMBThanachart Bank and China Merchants

Assuming the 90 days trading horizon TMBThanachart Bank Public is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, TMBThanachart Bank Public is 2.56 times less risky than China Merchants. The stock trades about -0.07 of its potential returns per unit of risk. The China Merchants Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  346.00  in China Merchants Bank on September 13, 2024 and sell it today you would earn a total of  122.00  from holding China Merchants Bank or generate 35.26% return on investment over 90 days.

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

TMBThanachart Bank Public  vs.  China Merchants Bank

TMBThanachart Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Merchants Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TMBThanachart Bank and China Merchants

The main advantage of trading using opposite TMBThanachart Bank and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMBThanachart Bank 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.

The idea behind TMBThanachart Bank Public and China Merchants 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.