Correlation Between United Overseas and China Merchants
Can any of the company-specific risk be diversified away by investing in both United Overseas 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 United Overseas and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Overseas Bank and China Merchants Bank, you can compare the effects of market volatilities on United Overseas 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 United Overseas with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Overseas and China Merchants.
Diversification Opportunities for United Overseas and China Merchants
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and China is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank 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 United Overseas 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 United Overseas Bank 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 United Overseas i.e., United Overseas and China Merchants go up and down completely randomly.
Pair Corralation between United Overseas and China Merchants
Assuming the 90 days horizon United Overseas is expected to generate 101.13 times less return on investment than China Merchants. But when comparing it to its historical volatility, United Overseas Bank is 2.01 times less risky than China Merchants. It trades about 0.01 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 424.00 in China Merchants Bank on September 24, 2024 and sell it today you would earn a total of 49.00 from holding China Merchants Bank or generate 11.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
United Overseas Bank vs. China Merchants Bank
Performance |
Timeline |
United Overseas Bank |
China Merchants Bank |
United Overseas and China Merchants Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Overseas and China Merchants
The main advantage of trading using opposite United Overseas and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Overseas 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.United Overseas vs. China Merchants Bank | United Overseas vs. HDFC Bank Limited | United Overseas vs. ICICI Bank Limited | United Overseas vs. PT Bank Central |
China Merchants vs. HDFC Bank Limited | China Merchants vs. ICICI Bank Limited | China Merchants vs. PT Bank Central | China Merchants vs. DBS Group Holdings |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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