Correlation Between Stellar and China Resources
Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and China Resources Power, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and China Resources.
Diversification Opportunities for Stellar and China Resources
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stellar and China is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power and Stellar 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 Stellar 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 Power has no effect on the direction of Stellar i.e., Stellar and China Resources go up and down completely randomly.
Pair Corralation between Stellar and China Resources
Assuming the 90 days trading horizon Stellar is expected to under-perform the China Resources. In addition to that, Stellar is 4.75 times more volatile than China Resources Power. It trades about -0.02 of its total potential returns per unit of risk. China Resources Power is currently generating about -0.09 per unit of volatility. If you would invest 217.00 in China Resources Power on October 28, 2024 and sell it today you would lose (12.00) from holding China Resources Power or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.7% |
| Values | Daily Returns |
Stellar vs. China Resources Power
Performance |
| Timeline |
| Stellar |
| China Resources Power |
Stellar and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and China Resources
The main advantage of trading using opposite Stellar and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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.The idea behind Stellar and China Resources Power pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Resources vs. FORMPIPE SOFTWARE AB | China Resources vs. Unity Software | China Resources vs. Tyson Foods | China Resources vs. Axway Software SA |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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