Correlation Between China Resources and VULCAN MATERIALS
Can any of the company-specific risk be diversified away by investing in both China Resources and VULCAN MATERIALS 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 VULCAN MATERIALS 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 VULCAN MATERIALS, you can compare the effects of market volatilities on China Resources and VULCAN MATERIALS 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 VULCAN MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and VULCAN MATERIALS.
Diversification Opportunities for China Resources and VULCAN MATERIALS
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and VULCAN is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of China Resources i.e., China Resources and VULCAN MATERIALS go up and down completely randomly.
Pair Corralation between China Resources and VULCAN MATERIALS
Assuming the 90 days horizon China Resources Beer is expected to under-perform the VULCAN MATERIALS. In addition to that, China Resources is 1.91 times more volatile than VULCAN MATERIALS. It trades about -0.01 of its total potential returns per unit of risk. VULCAN MATERIALS is currently generating about 0.06 per unit of volatility. If you would invest 16,892 in VULCAN MATERIALS on August 25, 2024 and sell it today you would earn a total of 9,708 from holding VULCAN MATERIALS or generate 57.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. VULCAN MATERIALS
Performance |
| Timeline |
| China Resources Beer |
| VULCAN MATERIALS |
China Resources and VULCAN MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and VULCAN MATERIALS
The main advantage of trading using opposite China Resources and VULCAN MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, VULCAN MATERIALS 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 VULCAN MATERIALS will offset losses from the drop in VULCAN MATERIALS's long position.| China Resources vs. Molson Coors Brewing | China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Royal Unibrew AS |
| VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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