Correlation Between China Resources and Liberty Northwest
Can any of the company-specific risk be diversified away by investing in both China Resources and Liberty Northwest 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 Liberty Northwest 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 Liberty Northwest Bancorp, you can compare the effects of market volatilities on China Resources and Liberty Northwest 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 Liberty Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Liberty Northwest.
Diversification Opportunities for China Resources and Liberty Northwest
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Liberty is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of China Resources i.e., China Resources and Liberty Northwest go up and down completely randomly.
Pair Corralation between China Resources and Liberty Northwest
Assuming the 90 days horizon China Resources Beer is expected to generate 2.47 times more return on investment than Liberty Northwest. However, China Resources is 2.47 times more volatile than Liberty Northwest Bancorp. It trades about 0.12 of its potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.03 per unit of risk. If you would invest 261.00 in China Resources Beer on October 24, 2024 and sell it today you would earn a total of 32.00 from holding China Resources Beer or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
China Resources Beer vs. Liberty Northwest Bancorp
Performance |
| Timeline |
| China Resources Beer |
| Liberty Northwest Bancorp |
China Resources and Liberty Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Liberty Northwest
The main advantage of trading using opposite China Resources and Liberty Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Liberty Northwest 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 Liberty Northwest will offset losses from the drop in Liberty Northwest's long position.| China Resources vs. Tsingtao Brewery Co | China Resources vs. Budweiser Brewing | China Resources vs. Boston Beer | China Resources vs. Anheuser Busch Inbev |
| Liberty Northwest vs. Thai Beverage PCL | Liberty Northwest vs. AKITA Drilling | Liberty Northwest vs. Awilco Drilling PLC | Liberty Northwest vs. National Beverage Corp |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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