Correlation Between Cisco Systems and China Merchants

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and China Merchants Bank, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and China Merchants.

Diversification Opportunities for Cisco Systems and China Merchants

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cisco and China is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and China Merchants go up and down completely randomly.

Pair Corralation between Cisco Systems and China Merchants

Given the investment horizon of 90 days Cisco Systems is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, Cisco Systems is 1.37 times less risky than China Merchants. The stock trades about -0.39 of its potential returns per unit of risk. The China Merchants Bank is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,529  in China Merchants Bank on June 28, 2022 and sell it today you would lose (159.00)  from holding China Merchants Bank or give up 6.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  China Merchants Bank

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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

China Price Channel

Cisco Systems and China Merchants Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and China Merchants

The main advantage of trading using opposite Cisco Systems and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.
Cisco Systems vs. Kibush Capital Corp
The idea behind Cisco Systems 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. Kibush Capital Corp
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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Shere Portfolio
Track or share privately all of your investments from the convenience of any device
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go