Correlation Between China Resources and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both China Resources and Cisco Systems 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 Cisco Systems 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 Cisco Systems, you can compare the effects of market volatilities on China Resources and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Cisco Systems.
Diversification Opportunities for China Resources and Cisco Systems
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Cisco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of China Resources i.e., China Resources and Cisco Systems go up and down completely randomly.
Pair Corralation between China Resources and Cisco Systems
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Cisco Systems. In addition to that, China Resources is 3.65 times more volatile than Cisco Systems. It trades about -0.12 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.37 per unit of volatility. If you would invest 4,756 in Cisco Systems on September 3, 2024 and sell it today you would earn a total of 883.00 from holding Cisco Systems or generate 18.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Cisco Systems
Performance |
| Timeline |
| China Resources Beer |
| Cisco Systems |
China Resources and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Cisco Systems
The main advantage of trading using opposite China Resources and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' 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 |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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