Correlation Between China Merchants and Maccura Biotechnology

Can any of the company-specific risk be diversified away by investing in both China Merchants and Maccura Biotechnology 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 Maccura Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Merchants Shekou and Maccura Biotechnology Co, you can compare the effects of market volatilities on China Merchants and Maccura Biotechnology 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 Maccura Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Maccura Biotechnology.

Diversification Opportunities for China Merchants and Maccura Biotechnology

0.81

Correlation Coefficient

China Merchants  Maccura Biotechnology

Very poor diversification

The 3 months correlation between China and Maccura is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Shekou and Maccura Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maccura Biotechnology 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 Shekou are associated (or correlated) with Maccura Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maccura Biotechnology has no effect on the direction of China Merchants i.e., China Merchants and Maccura Biotechnology go up and down completely randomly.

Pair Corralation between China Merchants and Maccura Biotechnology

Assuming the 90 days trading horizon China Merchants is expected to generate 1.67 times less return on investment than Maccura Biotechnology. In addition to that, China Merchants is 1.03 times more volatile than Maccura Biotechnology Co. It trades about 0.06 of its total potential returns per unit of risk. Maccura Biotechnology Co is currently generating about 0.1 per unit of volatility. If you would invest  1,163  in Maccura Biotechnology Co on September 25, 2024 and sell it today you would earn a total of  195.00  from holding Maccura Biotechnology Co or generate 16.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

China Merchants Shekou  vs.  Maccura Biotechnology Co

China Merchants Shekou

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Shekou are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Maccura Biotechnology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maccura Biotechnology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Maccura Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Merchants and Maccura Biotechnology

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

The idea behind China Merchants Shekou and Maccura Biotechnology Co 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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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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.