Correlation Between China Resources and City Developments
Can any of the company-specific risk be diversified away by investing in both China Resources and City Developments 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 City Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Land and City Developments Limited, you can compare the effects of market volatilities on China Resources and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and City Developments.
Diversification Opportunities for China Resources and City Developments
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and City is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Land and City Developments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 Land are associated (or correlated) with City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of China Resources i.e., China Resources and City Developments go up and down completely randomly.
Pair Corralation between China Resources and City Developments
Assuming the 90 days horizon China Resources Land is expected to generate 1.74 times more return on investment than City Developments. However, China Resources is 1.74 times more volatile than City Developments Limited. It trades about -0.01 of its potential returns per unit of risk. City Developments Limited is currently generating about -0.11 per unit of risk. If you would invest 4,095 in China Resources Land on September 4, 2024 and sell it today you would lose (1,057) from holding China Resources Land or give up 25.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 37.85% |
| Values | Daily Returns |
China Resources Land vs. City Developments Limited
Performance |
| Timeline |
| China Resources Land |
| City Developments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Resources and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and City Developments
The main advantage of trading using opposite China Resources and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.| China Resources vs. Hong Kong Land | China Resources vs. Holiday Island Holdings | China Resources vs. Sun Hung Kai |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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