Correlation Between China Merchants and Atai Life

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Can any of the company-specific risk be diversified away by investing in both China Merchants and Atai Life 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 Atai Life 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 Atai Life Sciences, you can compare the effects of market volatilities on China Merchants and Atai Life 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 Atai Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Atai Life.

Diversification Opportunities for China Merchants and Atai Life

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between China and Atai Life is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Atai Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atai Life Sciences 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 Atai Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atai Life Sciences has no effect on the direction of China Merchants i.e., China Merchants and Atai Life go up and down completely randomly.

Pair Corralation between China Merchants and Atai Life

Assuming the 90 days horizon China Merchants Bank is expected to generate 0.47 times more return on investment than Atai Life. However, China Merchants Bank is 2.14 times less risky than Atai Life. It trades about -0.14 of its potential returns per unit of risk. Atai Life Sciences is currently generating about -0.3 per unit of risk. 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]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Merchants Bank  vs.  Atai Life Sciences

 Performance (%) 
       Timeline  
China Merchants Bank 
China Performance
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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

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

Atai Life Price Channel

China Merchants and Atai Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Merchants and Atai Life

The main advantage of trading using opposite China Merchants and Atai Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Atai Life 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 Atai Life will offset losses from the drop in Atai Life's long position.
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The idea behind China Merchants Bank and Atai Life Sciences 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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