Correlation Between Uwharrie Capital and China Merchants

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

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

Diversification Opportunities for Uwharrie Capital and China Merchants

0.54

Correlation Coefficient

Uwharrie Capital  China Merchants

Very weak diversification

The 3 months correlation between Uwharrie and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Uwharrie Capital Corp 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 Uwharrie Capital 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 Uwharrie Capital Corp 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 Uwharrie Capital i.e., Uwharrie Capital and China Merchants go up and down completely randomly.

Pair Corralation between Uwharrie Capital and China Merchants

Given the investment horizon of 90 days Uwharrie Capital Corp is expected to under-perform the China Merchants. In addition to that, Uwharrie Capital is 1.25 times more volatile than China Merchants Bank. It trades about 0.0 of its total potential returns per unit of risk. China Merchants Bank is currently generating about 0.11 per unit of volatility. If you would invest  2,540  in China Merchants Bank on December 29, 2024 and sell it today you would earn a total of  377.00  from holding China Merchants Bank or generate 14.84% return on investment over 90 days.

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

Uwharrie Capital Corp  vs.  China Merchants Bank

Uwharrie Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Uwharrie Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Uwharrie Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

China Merchants Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, China Merchants showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Uwharrie Capital and China Merchants

The main advantage of trading using opposite Uwharrie Capital and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uwharrie Capital 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 Uwharrie Capital Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.