Correlation Between China Resources and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both China Resources and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on China Resources and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Chongqing Machinery.
Diversification Opportunities for China Resources and Chongqing Machinery
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Chongqing is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of China Resources i.e., China Resources and Chongqing Machinery go up and down completely randomly.
Pair Corralation between China Resources and Chongqing Machinery
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Chongqing Machinery. In addition to that, China Resources is 1.66 times more volatile than Chongqing Machinery Electric. It trades about -0.17 of its total potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.04 per unit of volatility. If you would invest 7.35 in Chongqing Machinery Electric on August 29, 2024 and sell it today you would earn a total of 0.10 from holding Chongqing Machinery Electric or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Chongqing Machinery Electric
Performance |
| Timeline |
| China Resources Beer |
| Chongqing Machinery |
China Resources and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Chongqing Machinery
The main advantage of trading using opposite China Resources and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| China Resources vs. Diamyd Medical AB | China Resources vs. Monster Beverage Corp | China Resources vs. Dairy Farm International | China Resources vs. INDOFOOD AGRI RES |
| Chongqing Machinery vs. Park Hotels Resorts | Chongqing Machinery vs. Materialise NV | Chongqing Machinery vs. InterContinental Hotels Group | Chongqing Machinery vs. Summit Hotel Properties |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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