Correlation Between Playmates Toys and China Resources

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

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

Diversification Opportunities for Playmates Toys and China Resources

0.25

Correlation Coefficient

Playmates Toys  China Resources

Modest diversification

The 3 months correlation between Playmates and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Playmates Toys Limited 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 Playmates Toys 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 Playmates Toys Limited 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 Playmates Toys i.e., Playmates Toys and China Resources go up and down completely randomly.

Pair Corralation between Playmates Toys and China Resources

Assuming the 90 days horizon Playmates Toys Limited is expected to generate 2.53 times more return on investment than China Resources. However, Playmates Toys is 2.53 times more volatile than China Resources Beer. It trades about 0.07 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.02 per unit of risk. If you would invest  1.35  in Playmates Toys Limited on October 11, 2024 and sell it today you would earn a total of  5.25  from holding Playmates Toys Limited or generate 388.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Playmates Toys Limited  vs.  China Resources Beer

Playmates Toys

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Beer 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 Playmates Toys and China Resources

The main advantage of trading using opposite Playmates Toys and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playmates Toys 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 Playmates Toys Limited and China Resources Beer 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.