Correlation Between Eastroc Beverage and Chongqing Changan

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

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

Diversification Opportunities for Eastroc Beverage and Chongqing Changan

-0.57

Correlation Coefficient

Eastroc Beverage  Chongqing Changan

Excellent diversification

The 3 months correlation between Eastroc and Chongqing is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Chongqing Changan Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Changan and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Chongqing Changan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Changan has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Chongqing Changan go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Chongqing Changan

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to generate 0.99 times more return on investment than Chongqing Changan. However, Eastroc Beverage Group is 1.01 times less risky than Chongqing Changan. It trades about 0.07 of its potential returns per unit of risk. Chongqing Changan Automobile is currently generating about -0.04 per unit of risk. If you would invest  22,199  in Eastroc Beverage Group on October 25, 2024 and sell it today you would earn a total of  2,082  from holding Eastroc Beverage Group or generate 9.38% return on investment over 90 days.

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

Eastroc Beverage Group  vs.  Chongqing Changan Automobile

Eastroc Beverage

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chongqing Changan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Changan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastroc Beverage and Chongqing Changan

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

The idea behind Eastroc Beverage Group and Chongqing Changan Automobile 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.