Correlation Between China Resources and Compagnie Plastic
Can any of the company-specific risk be diversified away by investing in both China Resources and Compagnie Plastic 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 Compagnie Plastic 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 Compagnie Plastic Omnium, you can compare the effects of market volatilities on China Resources and Compagnie Plastic 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 Compagnie Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Compagnie Plastic.
Diversification Opportunities for China Resources and Compagnie Plastic
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Compagnie is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of China Resources i.e., China Resources and Compagnie Plastic go up and down completely randomly.
Pair Corralation between China Resources and Compagnie Plastic
Assuming the 90 days horizon China Resources Beer is expected to generate 1.28 times more return on investment than Compagnie Plastic. However, China Resources is 1.28 times more volatile than Compagnie Plastic Omnium. It trades about -0.01 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about -0.03 per unit of risk. If you would invest 452.00 in China Resources Beer on August 25, 2024 and sell it today you would lose (132.00) from holding China Resources Beer or give up 29.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Compagnie Plastic Omnium
Performance |
| Timeline |
| China Resources Beer |
| Compagnie Plastic Omnium |
China Resources and Compagnie Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Compagnie Plastic
The main advantage of trading using opposite China Resources and Compagnie Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Compagnie Plastic 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 Compagnie Plastic will offset losses from the drop in Compagnie Plastic's long position.| China Resources vs. Molson Coors Brewing | China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Royal Unibrew AS |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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