Correlation Between China Merchants and China Merchants

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

Diversification Opportunities for China Merchants and China Merchants

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between China and China is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants 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 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 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 China Merchants i.e., China Merchants and China Merchants go up and down completely randomly.

Pair Corralation between China Merchants and China Merchants

Assuming the 90 days horizon China Merchants is expected to generate 2.09 times less return on investment than China Merchants. But when comparing it to its historical volatility, China Merchants Bank is 1.94 times less risky than China Merchants. It trades about 0.09 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  630.00  in China Merchants Bank on March 30, 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 Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

China Merchants Bank  vs.  China Merchants Bank

 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 weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0374
Payout Ratio
0.68
Forward Annual Dividend Rate
1.14
Dividend Date
2022-08-25
Ex Dividend Date
2022-07-06

China 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 latest weak 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
0.0414
Payout Ratio
0.11
Last Split Factor
1098:1073
Forward Annual Dividend Rate
0.24
Dividend Date
2017-07-14
Ex Dividend Date
2022-07-07
Last Split Date
2013-08-29

China Price Channel

China Merchants and China Merchants Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with China Merchants and China Merchants

The main advantage of trading using opposite China Merchants and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants 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.

China Merchants Bank

Pair trading matchups for China Merchants

The idea behind China Merchants Bank 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 Bank

Pair trading matchups for China Merchants

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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