Correlation Between China Resources and Applied Materials
Can any of the company-specific risk be diversified away by investing in both China Resources and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on China Resources and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Applied Materials.
Diversification Opportunities for China Resources and Applied Materials
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Applied is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of China Resources i.e., China Resources and Applied Materials go up and down completely randomly.
Pair Corralation between China Resources and Applied Materials
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Applied Materials. In addition to that, China Resources is 1.25 times more volatile than Applied Materials. It trades about -0.13 of its total potential returns per unit of risk. Applied Materials is currently generating about -0.09 per unit of volatility. If you would invest 17,171 in Applied Materials on August 30, 2024 and sell it today you would lose (1,111) from holding Applied Materials or give up 6.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Resources Beer vs. Applied Materials
Performance |
| Timeline |
| China Resources Beer |
| Applied Materials |
China Resources and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Applied Materials
The main advantage of trading using opposite China Resources and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| China Resources vs. Iridium Communications | China Resources vs. Cogent Communications Holdings | China Resources vs. Meli Hotels International | China Resources vs. Gamma Communications plc |
| Applied Materials vs. Lam Research | Applied Materials vs. KLA Corporation | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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