Correlation Between CIFI Holdings and China Resources

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

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

Diversification Opportunities for CIFI Holdings and China Resources

0.89

Correlation Coefficient

CIFI Holdings  China Resources

Very poor diversification

The 3 months correlation between CIFI and China is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CIFI Holdings Co 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 CIFI Holdings 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 CIFI Holdings Co 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 CIFI Holdings i.e., CIFI Holdings and China Resources go up and down completely randomly.

Pair Corralation between CIFI Holdings and China Resources

Assuming the 90 days horizon CIFI Holdings Co is expected to generate 2.51 times more return on investment than China Resources. However, CIFI Holdings is 2.51 times more volatile than China Resources Land. It trades about 0.03 of its potential returns per unit of risk. China Resources Land is currently generating about 0.05 per unit of risk. If you would invest  11.00  in CIFI Holdings Co on September 23, 2024 and sell it today you would lose (8.15) from holding CIFI Holdings Co or give up 74.09% of portfolio value over 90 days.

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

CIFI Holdings Co  vs.  China Resources Land

CIFI Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIFI Holdings Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CIFI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

China Resources Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land 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 CIFI Holdings and China Resources

The main advantage of trading using opposite CIFI Holdings and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIFI Holdings 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 CIFI Holdings Co 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.