Correlation Between China State and Eastroc Beverage

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

By analyzing existing cross correlation between China State Construction and Eastroc Beverage Group, you can compare the effects of market volatilities on China State and Eastroc Beverage 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 China State with a short position of Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Eastroc Beverage.

Diversification Opportunities for China State and Eastroc Beverage

0.94

Correlation Coefficient

China State  Eastroc Beverage

Almost no diversification

The 3 months correlation between China and Eastroc is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage and China State 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 China State Construction are associated (or correlated) with Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of China State i.e., China State and Eastroc Beverage go up and down completely randomly.

Pair Corralation between China State and Eastroc Beverage

Assuming the 90 days trading horizon China State Construction is expected to generate 1.3 times more return on investment than Eastroc Beverage. However, China State is 1.3 times more volatile than Eastroc Beverage Group. It trades about 0.16 of its potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.21 per unit of risk. If you would invest  479.00  in China State Construction on September 12, 2024 and sell it today you would earn a total of  133.00  from holding China State Construction or generate 27.77% return on investment over 90 days.

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

China State Construction  vs.  Eastroc Beverage Group

China State Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China State Construction are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China State sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China State and Eastroc Beverage

The main advantage of trading using opposite China State and Eastroc Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State position performs unexpectedly, Eastroc Beverage 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 Eastroc Beverage will offset losses from the drop in Eastroc Beverage's long position.

The idea behind China State Construction and Eastroc Beverage Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.