Correlation Between TriState Capital and China Merchants

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

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

Diversification Opportunities for TriState Capital and China Merchants

0.0

Correlation Coefficient

TriState Capital  China Merchants

Pay attention - limited upside

The 3 months correlation between TriState and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TriState Capital Holdings 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 TriState Capital 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 TriState Capital Holdings 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 TriState Capital i.e., TriState Capital and China Merchants go up and down completely randomly.

Pair Corralation between TriState Capital and China Merchants

If you would invest  1,983  in China Merchants Bank on January 26, 2024 and sell it today you would earn a total of  117.00  from holding China Merchants Bank or generate 5.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

TriState Capital Holdings  vs.  China Merchants Bank

TriState Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TriState Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, TriState Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

China Merchants Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 7 (%) 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.

Pair Trading with TriState Capital and China Merchants

The main advantage of trading using opposite TriState Capital and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TriState Capital 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 TriState Capital Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.