Correlation Between China Merchants and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both China Merchants and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on China Merchants and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and Meta Platforms.
Diversification Opportunities for China Merchants and Meta Platforms
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Meta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of China Merchants i.e., China Merchants and Meta Platforms go up and down completely randomly.
Pair Corralation between China Merchants and Meta Platforms
Assuming the 90 days horizon China Merchants Bank is expected to generate 0.72 times more return on investment than Meta Platforms. However, China Merchants Bank is 1.4 times less risky than Meta Platforms. It trades about 0.0 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.13 per unit of risk. If you would invest 2,563 in China Merchants Bank on January 26, 2024 and sell it today you would lose (463.00) from holding China Merchants Bank or give up 18.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 7.29% |
| Values | Daily Returns |
China Merchants Bank vs. Meta Platforms
Performance |
| Timeline |
| China Merchants Bank |
| Meta Platforms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Merchants and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Merchants and Meta Platforms
The main advantage of trading using opposite China Merchants and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| China Merchants vs. Lloyds Banking Group | China Merchants vs. Western Alliance Bancorporation | China Merchants vs. JAPAN POST BANK |
| Meta Platforms vs. Meta Platforms | Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc |
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 the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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