Correlation Between China Merchants and Marssenger Kitchenware

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

Diversification Opportunities for China Merchants and Marssenger Kitchenware

0.93

Correlation Coefficient

China Merchants  Marssenger Kitchenware

Almost no diversification

The 3 months correlation between China and Marssenger is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Shekou and Marssenger Kitchenware Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marssenger Kitchenware 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 Marssenger Kitchenware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marssenger Kitchenware has no effect on the direction of China Merchants i.e., China Merchants and Marssenger Kitchenware go up and down completely randomly.

Pair Corralation between China Merchants and Marssenger Kitchenware

Assuming the 90 days trading horizon China Merchants Shekou is expected to generate 0.81 times more return on investment than Marssenger Kitchenware. However, China Merchants Shekou is 1.23 times less risky than Marssenger Kitchenware. It trades about 0.13 of its potential returns per unit of risk. Marssenger Kitchenware Co is currently generating about 0.1 per unit of risk. If you would invest  1,099  in China Merchants Shekou on August 31, 2024 and sell it today you would earn a total of  81.00  from holding China Merchants Shekou or generate 7.37% return on investment over 90 days.

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

China Merchants Shekou  vs.  Marssenger Kitchenware Co

China Merchants Shekou

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Shekou are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Merchants sustained solid returns over the last few months and may actually be approaching a breakup point.

Marssenger Kitchenware

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marssenger Kitchenware Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marssenger Kitchenware sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Merchants and Marssenger Kitchenware

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

The idea behind China Merchants Shekou and Marssenger Kitchenware 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.