Correlation Between China Resources and James Hardie
Can any of the company-specific risk be diversified away by investing in both China Resources and James Hardie 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 China Resources and James Hardie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Cement and James Hardie Industries, you can compare the effects of market volatilities on China Resources and James Hardie 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 China Resources with a short position of James Hardie. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and James Hardie.
Diversification Opportunities for China Resources and James Hardie
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and James is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Cement and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries and China Resources 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 China Resources Cement are associated (or correlated) with James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of China Resources i.e., China Resources and James Hardie go up and down completely randomly.
Pair Corralation between China Resources and James Hardie
Assuming the 90 days horizon China Resources Cement is expected to under-perform the James Hardie. In addition to that, China Resources is 2.09 times more volatile than James Hardie Industries. It trades about -0.04 of its total potential returns per unit of risk. James Hardie Industries is currently generating about -0.03 per unit of volatility. If you would invest 3,461 in James Hardie Industries on September 14, 2024 and sell it today you would lose (41.00) from holding James Hardie Industries or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Cement vs. James Hardie Industries
Performance |
| Timeline |
| China Resources Cement |
| James Hardie Industries |
China Resources and James Hardie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and James Hardie
The main advantage of trading using opposite China Resources and James Hardie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, James Hardie 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 James Hardie will offset losses from the drop in James Hardie's long position.| China Resources vs. CRH PLC ADR | China Resources vs. Holcim | China Resources vs. Lafargeholcim Ltd ADR | China Resources vs. Vulcan Materials |
| James Hardie vs. Loma Negra Compania | James Hardie vs. Summit Materials | James Hardie vs. United States Lime | James Hardie vs. Eagle Materials |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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