Correlation Between InPlay Oil and China Resources
Can any of the company-specific risk be diversified away by investing in both InPlay Oil and China Resources 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 InPlay Oil and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and China Resources Beer, you can compare the effects of market volatilities on InPlay Oil and China Resources 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 InPlay Oil with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and China Resources.
Diversification Opportunities for InPlay Oil and China Resources
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between InPlay and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of InPlay Oil i.e., InPlay Oil and China Resources go up and down completely randomly.
Pair Corralation between InPlay Oil and China Resources
Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 1.53 times less risky than China Resources. The stock trades about -0.03 of its potential returns per unit of risk. The China Resources Beer is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 455.00 in China Resources Beer on September 14, 2024 and sell it today you would lose (137.00) from holding China Resources Beer or give up 30.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InPlay Oil Corp vs. China Resources Beer
Performance |
| Timeline |
| InPlay Oil Corp |
| China Resources Beer |
InPlay Oil and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and China Resources
The main advantage of trading using opposite InPlay Oil and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil position performs unexpectedly, China Resources 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 Resources will offset losses from the drop in China Resources' long position.| InPlay Oil vs. BJs Restaurants | InPlay Oil vs. Spirent Communications plc | InPlay Oil vs. KRISPY KREME DL 01 | InPlay Oil vs. AGF Management Limited |
| China Resources vs. PLAYMATES TOYS | China Resources vs. InPlay Oil Corp | China Resources vs. Playtech plc | China Resources vs. Universal Display |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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