Correlation Between Deutsche Post and China Merchants
Can any of the company-specific risk be diversified away by investing in both Deutsche Post 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 Deutsche Post and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Post AG and China Merchants Bank, you can compare the effects of market volatilities on Deutsche Post 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 Deutsche Post with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Post and China Merchants.
Diversification Opportunities for Deutsche Post and China Merchants
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Deutsche and China is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Post AG 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 Deutsche Post 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 Deutsche Post AG 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 Deutsche Post i.e., Deutsche Post and China Merchants go up and down completely randomly.
Pair Corralation between Deutsche Post and China Merchants
Assuming the 90 days horizon Deutsche Post AG is expected to under-perform the China Merchants. In addition to that, Deutsche Post is 1.05 times more volatile than China Merchants Bank. It trades about -0.04 of its total potential returns per unit of risk. China Merchants Bank is currently generating about 0.16 per unit of volatility. If you would invest 2,009 in China Merchants Bank on February 21, 2024 and sell it today you would earn a total of 456.00 from holding China Merchants Bank or generate 22.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Deutsche Post AG vs. China Merchants Bank
Performance |
Timeline |
Deutsche Post AG |
China Merchants Bank |
Deutsche Post and China Merchants Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deutsche Post and China Merchants
The main advantage of trading using opposite Deutsche Post and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Post 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.Deutsche Post vs. Kuehne Nagel International | Deutsche Post vs. Kuehne Nagel International | Deutsche Post vs. DSV Panalpina AS | Deutsche Post vs. DSV Panalpina AS |
China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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