Correlation Between LEGACY IRON and China Resources
Can any of the company-specific risk be diversified away by investing in both LEGACY IRON 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 LEGACY IRON and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and China Resources Beer, you can compare the effects of market volatilities on LEGACY IRON 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 LEGACY IRON with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and China Resources.
Diversification Opportunities for LEGACY IRON and China Resources
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LEGACY and China is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE 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 LEGACY IRON 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 LEGACY IRON ORE 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 LEGACY IRON i.e., LEGACY IRON and China Resources go up and down completely randomly.
Pair Corralation between LEGACY IRON and China Resources
Assuming the 90 days trading horizon LEGACY IRON ORE is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, LEGACY IRON ORE is 2.97 times less risky than China Resources. The stock trades about -0.15 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 332.00 in China Resources Beer on August 27, 2024 and sell it today you would lose (20.00) from holding China Resources Beer or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGACY IRON ORE vs. China Resources Beer
Performance |
| Timeline |
| LEGACY IRON ORE |
| China Resources Beer |
LEGACY IRON and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGACY IRON and China Resources
The main advantage of trading using opposite LEGACY IRON and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON 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.| LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Microsoft |
| China Resources vs. LIFENET INSURANCE CO | China Resources vs. INSURANCE AUST GRP | China Resources vs. REVO INSURANCE SPA | China Resources vs. DiamondRock Hospitality |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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