Correlation Between BUDWEISER BREWUNSPADR/4 and China Resources

Can any of the company-specific risk be diversified away by investing in both BUDWEISER BREWUNSPADR/4 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 BUDWEISER BREWUNSPADR/4 and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BUDWEISER BREWUNSPADR4 and China Resources Beer, you can compare the effects of market volatilities on BUDWEISER BREWUNSPADR/4 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 BUDWEISER BREWUNSPADR/4 with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BUDWEISER BREWUNSPADR/4 and China Resources.

Diversification Opportunities for BUDWEISER BREWUNSPADR/4 and China Resources

0.84

Correlation Coefficient

BUDWEISER BREWUNSPADR/4  China Resources

Very poor diversification

The 3 months correlation between BUDWEISER and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BUDWEISER BREWUNSPADR4 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 BUDWEISER BREWUNSPADR/4 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 BUDWEISER BREWUNSPADR4 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 BUDWEISER BREWUNSPADR/4 i.e., BUDWEISER BREWUNSPADR/4 and China Resources go up and down completely randomly.

Pair Corralation between BUDWEISER BREWUNSPADR/4 and China Resources

Assuming the 90 days trading horizon BUDWEISER BREWUNSPADR4 is expected to generate 1.06 times more return on investment than China Resources. However, BUDWEISER BREWUNSPADR/4 is 1.06 times more volatile than China Resources Beer. It trades about -0.04 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.07 per unit of risk. If you would invest  362.00  in BUDWEISER BREWUNSPADR4 on September 23, 2024 and sell it today you would lose (34.00) from holding BUDWEISER BREWUNSPADR4 or give up 9.39% of portfolio value over 90 days.

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

BUDWEISER BREWUNSPADR4  vs.  China Resources Beer

BUDWEISER BREWUNSPADR/4

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BUDWEISER BREWUNSPADR4 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, BUDWEISER BREWUNSPADR/4 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Resources Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BUDWEISER BREWUNSPADR/4 and China Resources

The main advantage of trading using opposite BUDWEISER BREWUNSPADR/4 and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BUDWEISER BREWUNSPADR/4 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 BUDWEISER BREWUNSPADR4 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.