Correlation Between China Resources and NEXON Co
Can any of the company-specific risk be diversified away by investing in both China Resources and NEXON Co 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 NEXON Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and NEXON Co, you can compare the effects of market volatilities on China Resources and NEXON Co 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 NEXON Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and NEXON Co.
Diversification Opportunities for China Resources and NEXON Co
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and NEXON is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON Co 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 Beer are associated (or correlated) with NEXON Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON Co has no effect on the direction of China Resources i.e., China Resources and NEXON Co go up and down completely randomly.
Pair Corralation between China Resources and NEXON Co
Assuming the 90 days horizon China Resources Beer is expected to generate 1.05 times more return on investment than NEXON Co. However, China Resources is 1.05 times more volatile than NEXON Co. It trades about -0.06 of its potential returns per unit of risk. NEXON Co is currently generating about -0.14 per unit of risk. If you would invest 340.00 in China Resources Beer on September 5, 2024 and sell it today you would lose (22.00) from holding China Resources Beer or give up 6.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Resources Beer vs. NEXON Co
Performance |
| Timeline |
| China Resources Beer |
| NEXON Co |
China Resources and NEXON Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and NEXON Co
The main advantage of trading using opposite China Resources and NEXON Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, NEXON Co 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 NEXON Co will offset losses from the drop in NEXON Co's long position.The idea behind China Resources Beer and NEXON Co 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.| NEXON Co vs. China Resources Beer | NEXON Co vs. Japan Asia Investment | NEXON Co vs. Strategic Investments AS | NEXON Co vs. Molson Coors Beverage |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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