Correlation Between Harbor Bankshares and China Merchants

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

By analyzing existing cross correlation between Harbor Bankshares and China Merchants Bank, you can compare the effects of market volatilities on Harbor Bankshares 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 Harbor Bankshares with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Bankshares and China Merchants.

Diversification Opportunities for Harbor Bankshares and China Merchants

-0.45

Correlation Coefficient

Harbor Bankshares  China Merchants

Very good diversification

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

Pair Corralation between Harbor Bankshares and China Merchants

Given the investment horizon of 90 days Harbor Bankshares is expected to generate 14.65 times more return on investment than China Merchants. However, Harbor Bankshares is 14.65 times more volatile than China Merchants Bank. It trades about 0.17 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.22 per unit of risk. If you would invest  820.00  in Harbor Bankshares on January 24, 2024 and sell it today you would earn a total of  170.00  from holding Harbor Bankshares or generate 20.73% return on investment over 90 days.

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

Harbor Bankshares  vs.  China Merchants Bank

Harbor Bankshares

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Harbor Bankshares may actually be approaching a critical reversion point that can send shares even higher in May 2024.

China Merchants Bank

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, China Merchants may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Harbor Bankshares and China Merchants

The main advantage of trading using opposite Harbor Bankshares and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbor Bankshares 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.

The idea behind Harbor Bankshares 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.