Correlation Between China Resources and Longfor Properties
Can any of the company-specific risk be diversified away by investing in both China Resources and Longfor Properties 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 Longfor Properties 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 Longfor Properties Co, you can compare the effects of market volatilities on China Resources and Longfor Properties 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 Longfor Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Longfor Properties.
Diversification Opportunities for China Resources and Longfor Properties
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Longfor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Land and Longfor Properties Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Properties 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 Longfor Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Properties has no effect on the direction of China Resources i.e., China Resources and Longfor Properties go up and down completely randomly.
Pair Corralation between China Resources and Longfor Properties
Assuming the 90 days horizon China Resources Land is expected to generate 1.18 times more return on investment than Longfor Properties. However, China Resources is 1.18 times more volatile than Longfor Properties Co. It trades about 0.01 of its potential returns per unit of risk. Longfor Properties Co is currently generating about -0.01 per unit of risk. If you would invest 4,415 in China Resources Land on August 31, 2024 and sell it today you would lose (1,377) from holding China Resources Land or give up 31.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.26% |
| Values | Daily Returns |
China Resources Land vs. Longfor Properties Co
Performance |
| Timeline |
| China Resources Land |
| Longfor Properties |
China Resources and Longfor Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Longfor Properties
The main advantage of trading using opposite China Resources and Longfor Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Longfor Properties 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 Longfor Properties will offset losses from the drop in Longfor Properties' long position.| China Resources vs. HUMANA INC | China Resources vs. SCOR PK | China Resources vs. Aquagold International | China Resources vs. Thrivent High Yield |
| Longfor Properties vs. Sun Hung Kai | Longfor Properties vs. Country Garden Holdings | Longfor Properties vs. Sino Land Co | Longfor Properties 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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