Correlation Between JPM INDIAN and China Resources

Can any of the company-specific risk be diversified away by investing in both JPM INDIAN 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 JPM INDIAN and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JPM INDIAN INVT and China Resources Land, you can compare the effects of market volatilities on JPM INDIAN 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 JPM INDIAN with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPM INDIAN and China Resources.

Diversification Opportunities for JPM INDIAN and China Resources

-0.4

Correlation Coefficient

JPM INDIAN  China Resources

Very good diversification

The 3 months correlation between JPM and China is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding JPM INDIAN INVT and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land and JPM INDIAN 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 JPM INDIAN INVT 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 Land has no effect on the direction of JPM INDIAN i.e., JPM INDIAN and China Resources go up and down completely randomly.

Pair Corralation between JPM INDIAN and China Resources

Assuming the 90 days horizon JPM INDIAN is expected to generate 3.95 times less return on investment than China Resources. But when comparing it to its historical volatility, JPM INDIAN INVT is 3.36 times less risky than China Resources. It trades about 0.06 of its potential returns per unit of risk. China Resources Land is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  157.00  in China Resources Land on October 5, 2024 and sell it today you would earn a total of  121.00  from holding China Resources Land or generate 77.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

JPM INDIAN INVT  vs.  China Resources Land

JPM INDIAN INVT

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days JPM INDIAN INVT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JPM INDIAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

China Resources Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with JPM INDIAN and China Resources

The main advantage of trading using opposite JPM INDIAN and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPM INDIAN 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 JPM INDIAN INVT and China Resources Land 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.