Correlation Between Beyond Meat and China Merchants

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Can any of the company-specific risk be diversified away by investing in both Beyond Meat 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 Beyond Meat and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beyond Meat and China Merchants Bank, you can compare the effects of market volatilities on Beyond Meat 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 Beyond Meat with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beyond Meat and China Merchants.

Diversification Opportunities for Beyond Meat and China Merchants

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Beyond and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Meat 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 Beyond Meat 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 Beyond Meat 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 Beyond Meat i.e., Beyond Meat and China Merchants go up and down completely randomly.

Pair Corralation between Beyond Meat and China Merchants

Given the investment horizon of 90 days Beyond Meat is expected to under-perform the China Merchants. In addition to that, Beyond Meat is 2.69 times more volatile than China Merchants Bank. It trades about -0.43 of its total potential returns per unit of risk. China Merchants Bank is currently generating about -0.14 per unit of volatility. If you would invest  2,433  in China Merchants Bank on July 5, 2022 and sell it today you would lose (119.00)  from holding China Merchants Bank or give up 4.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Beyond Meat  vs.  China Merchants Bank

 Performance (%) 
       Timeline  
Beyond Meat 
Beyond Performance
0 of 100
Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Beyond Price Channel

China Merchants Bank 
China Performance
0 of 100
Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

China Price Channel

Beyond Meat and China Merchants Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beyond Meat and China Merchants

The main advantage of trading using opposite Beyond Meat and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beyond Meat 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.
Beyond Meat vs. Amazon Inc
The idea behind Beyond Meat 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.
China Merchants vs. Amazon Inc
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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