Correlation Between China Merchants and BRASIL ON

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

Diversification Opportunities for China Merchants and BRASIL ON

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between China and BRASIL is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and BRASIL ON NM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRASIL ON NM and China Merchants 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 China Merchants Bank are associated (or correlated) with BRASIL ON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRASIL ON NM has no effect on the direction of China Merchants i.e., China Merchants and BRASIL ON go up and down completely randomly.

Pair Corralation between China Merchants and BRASIL ON

Assuming the 90 days horizon China Merchants Bank is expected to generate 2.51 times more return on investment than BRASIL ON. However, China Merchants is 2.51 times more volatile than BRASIL ON NM. It trades about 0.09 of its potential returns per unit of risk. BRASIL ON NM is currently generating about -0.29 per unit of risk. If you would invest  630.00  in China Merchants Bank on April 4, 2022 and sell it today you would earn a total of  35.00  from holding China Merchants Bank or generate 5.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Merchants Bank  vs.  BRASIL ON NM

 Performance (%) 
      Timeline 
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 latest sluggish performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0342
Payout Ratio
0.11
Last Split Factor
1098:1073
Forward Annual Dividend Rate
0.23
Dividend Date
2017-07-14
Ex Dividend Date
2022-07-07
Last Split Date
2013-08-29

China Price Channel

BRASIL ON NM 
BRASIL Performance
0 of 100
Over the last 90 days BRASIL ON NM has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BRASIL ON is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BRASIL Price Channel

China Merchants and BRASIL ON Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with China Merchants and BRASIL ON

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

China Merchants Bank

Pair trading matchups for China Merchants

The idea behind China Merchants Bank and BRASIL ON NM 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.

BRASIL ON NM

Pair trading matchups for BRASIL ON

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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