Correlation Between China Resources and XAAR PLC
Can any of the company-specific risk be diversified away by investing in both China Resources and XAAR PLC 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 XAAR PLC 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 XAAR PLC LS 10, you can compare the effects of market volatilities on China Resources and XAAR PLC 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 XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and XAAR PLC.
Diversification Opportunities for China Resources and XAAR PLC
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and XAAR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS 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 XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of China Resources i.e., China Resources and XAAR PLC go up and down completely randomly.
Pair Corralation between China Resources and XAAR PLC
Assuming the 90 days horizon China Resources Beer is expected to generate 0.94 times more return on investment than XAAR PLC. However, China Resources Beer is 1.07 times less risky than XAAR PLC. It trades about -0.02 of its potential returns per unit of risk. XAAR PLC LS 10 is currently generating about -0.02 per unit of risk. If you would invest 487.00 in China Resources Beer on October 20, 2024 and sell it today you would lose (199.00) from holding China Resources Beer or give up 40.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. XAAR PLC LS 10
Performance |
| Timeline |
| China Resources Beer |
| XAAR PLC LS |
China Resources and XAAR PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and XAAR PLC
The main advantage of trading using opposite China Resources and XAAR PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, XAAR PLC 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 XAAR PLC will offset losses from the drop in XAAR PLC's long position.| China Resources vs. CN MODERN DAIRY | China Resources vs. THAI BEVERAGE | China Resources vs. GWILLI FOOD | China Resources vs. MTY Food Group |
| XAAR PLC vs. China Resources Beer | XAAR PLC vs. Monster Beverage Corp | XAAR PLC vs. Yuexiu Transport Infrastructure | XAAR PLC vs. THAI BEVERAGE |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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