Correlation Between China Merchants and Alpha Services

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

Diversification Opportunities for China Merchants and Alpha Services

-0.58

Correlation Coefficient

China Merchants  Alpha Services

Excellent diversification

The 3 months correlation between China and Alpha is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Alpha Services And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Services And 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 Alpha Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Services And has no effect on the direction of China Merchants i.e., China Merchants and Alpha Services go up and down completely randomly.

Pair Corralation between China Merchants and Alpha Services

If you would invest  1,979  in China Merchants Bank on August 31, 2024 and sell it today you would earn a total of  296.00  from holding China Merchants Bank or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

China Merchants Bank  vs.  Alpha Services And

China Merchants Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, China Merchants showed solid returns over the last few months and may actually be approaching a breakup point.

Alpha Services And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Services And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Alpha Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Merchants and Alpha Services

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

The idea behind China Merchants Bank and Alpha Services And 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.