Correlation Between China Resources and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both China Resources and Federal Agricultural 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 Federal Agricultural 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 Federal Agricultural Mortgage, you can compare the effects of market volatilities on China Resources and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Federal Agricultural.
Diversification Opportunities for China Resources and Federal Agricultural
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Federal is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of China Resources i.e., China Resources and Federal Agricultural go up and down completely randomly.
Pair Corralation between China Resources and Federal Agricultural
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Federal Agricultural. In addition to that, China Resources is 1.4 times more volatile than Federal Agricultural Mortgage. It trades about -0.01 of its total potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of volatility. If you would invest 10,674 in Federal Agricultural Mortgage on September 3, 2024 and sell it today you would earn a total of 9,226 from holding Federal Agricultural Mortgage or generate 86.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| China Resources Beer |
| Federal Agricultural |
China Resources and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Federal Agricultural
The main advantage of trading using opposite China Resources and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| China Resources vs. Chuangs China Investments | China Resources vs. PennyMac Mortgage Investment | China Resources vs. Wyndham Hotels Resorts | China Resources vs. MHP Hotel AG |
| Federal Agricultural vs. Visa Inc | Federal Agricultural vs. Visa Inc | Federal Agricultural vs. American Express | Federal Agricultural vs. ORIX Corporation |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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