Correlation Between China Resources and POWER METALS
Can any of the company-specific risk be diversified away by investing in both China Resources and POWER METALS 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 POWER METALS 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 POWER METALS, you can compare the effects of market volatilities on China Resources and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and POWER METALS.
Diversification Opportunities for China Resources and POWER METALS
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and POWER is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of China Resources i.e., China Resources and POWER METALS go up and down completely randomly.
Pair Corralation between China Resources and POWER METALS
Assuming the 90 days horizon China Resources Beer is expected to under-perform the POWER METALS. But the stock apears to be less risky and, when comparing its historical volatility, China Resources Beer is 1.69 times less risky than POWER METALS. The stock trades about -0.01 of its potential returns per unit of risk. The POWER METALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 22.00 in POWER METALS on September 14, 2024 and sell it today you would earn a total of 7.00 from holding POWER METALS or generate 31.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. POWER METALS
Performance |
| Timeline |
| China Resources Beer |
| POWER METALS |
China Resources and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and POWER METALS
The main advantage of trading using opposite China Resources and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS's long position.| China Resources vs. PLAYMATES TOYS | China Resources vs. InPlay Oil Corp | China Resources vs. Playtech plc | China Resources vs. Universal Display |
| POWER METALS vs. COLUMBIA SPORTSWEAR | POWER METALS vs. Dairy Farm International | POWER METALS vs. ANTA SPORTS PRODUCT | POWER METALS vs. TITANIUM TRANSPORTGROUP |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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