Correlation Between China Resources and NAKED WINES
Can any of the company-specific risk be diversified away by investing in both China Resources and NAKED WINES 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 NAKED WINES 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 NAKED WINES PLC, you can compare the effects of market volatilities on China Resources and NAKED WINES 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 NAKED WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and NAKED WINES.
Diversification Opportunities for China Resources and NAKED WINES
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and NAKED is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC 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 NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of China Resources i.e., China Resources and NAKED WINES go up and down completely randomly.
Pair Corralation between China Resources and NAKED WINES
Assuming the 90 days horizon China Resources Beer is expected to generate 1.38 times more return on investment than NAKED WINES. However, China Resources is 1.38 times more volatile than NAKED WINES PLC. It trades about -0.06 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.11 per unit of risk. If you would invest 340.00 in China Resources Beer on September 5, 2024 and sell it today you would lose (22.00) from holding China Resources Beer 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. NAKED WINES PLC
Performance |
| Timeline |
| China Resources Beer |
| NAKED WINES PLC |
China Resources and NAKED WINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and NAKED WINES
The main advantage of trading using opposite China Resources and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, NAKED WINES 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 NAKED WINES will offset losses from the drop in NAKED WINES's long position.The idea behind China Resources Beer and NAKED WINES PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| NAKED WINES vs. CHINA TONTINE WINES | NAKED WINES vs. Superior Plus Corp | NAKED WINES vs. NMI Holdings | NAKED WINES vs. Origin Agritech |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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