Correlation Between China Resources and Tri Pointe
Can any of the company-specific risk be diversified away by investing in both China Resources and Tri Pointe 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 Tri Pointe 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 Tri Pointe Homes, you can compare the effects of market volatilities on China Resources and Tri Pointe 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 Tri Pointe. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Tri Pointe.
Diversification Opportunities for China Resources and Tri Pointe
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Tri is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Tri Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Pointe Homes 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 Tri Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Pointe Homes has no effect on the direction of China Resources i.e., China Resources and Tri Pointe go up and down completely randomly.
Pair Corralation between China Resources and Tri Pointe
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Tri Pointe. In addition to that, China Resources is 1.84 times more volatile than Tri Pointe Homes. It trades about -0.04 of its total potential returns per unit of risk. Tri Pointe Homes is currently generating about -0.03 per unit of volatility. If you would invest 3,960 in Tri Pointe Homes on September 12, 2024 and sell it today you would lose (60.00) from holding Tri Pointe Homes or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Tri Pointe Homes
Performance |
| Timeline |
| China Resources Beer |
| Tri Pointe Homes |
China Resources and Tri Pointe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Tri Pointe
The main advantage of trading using opposite China Resources and Tri Pointe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Tri Pointe 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 Tri Pointe will offset losses from the drop in Tri Pointe's long position.| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. SIVERS SEMICONDUCTORS AB | China Resources vs. NorAm Drilling AS |
| Tri Pointe vs. Lennar | Tri Pointe vs. Sekisui Chemical Co | Tri Pointe vs. Superior Plus Corp | Tri Pointe vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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