Correlation Between FIREWEED METALS and China Resources
Can any of the company-specific risk be diversified away by investing in both FIREWEED METALS and China Resources 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 FIREWEED METALS and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIREWEED METALS P and China Resources Beer, you can compare the effects of market volatilities on FIREWEED METALS and China Resources 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 FIREWEED METALS with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIREWEED METALS and China Resources.
Diversification Opportunities for FIREWEED METALS and China Resources
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FIREWEED and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and FIREWEED METALS 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 FIREWEED METALS P are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and China Resources go up and down completely randomly.
Pair Corralation between FIREWEED METALS and China Resources
Assuming the 90 days horizon FIREWEED METALS P is expected to generate 0.67 times more return on investment than China Resources. However, FIREWEED METALS P is 1.48 times less risky than China Resources. It trades about 0.14 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.06 per unit of risk. If you would invest 89.00 in FIREWEED METALS P on September 5, 2024 and sell it today you would earn a total of 7.00 from holding FIREWEED METALS P or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIREWEED METALS P vs. China Resources Beer
Performance |
| Timeline |
| FIREWEED METALS P |
| China Resources Beer |
FIREWEED METALS and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIREWEED METALS and China Resources
The main advantage of trading using opposite FIREWEED METALS and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| FIREWEED METALS vs. BlueScope Steel Limited | FIREWEED METALS vs. JD SPORTS FASH | FIREWEED METALS vs. Steel Dynamics | FIREWEED METALS vs. NIPPON STEEL SPADR |
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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