Correlation Between LIFE + and China Resources

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

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

Diversification Opportunities for LIFE + and China Resources

-0.69

Correlation Coefficient

LIFE +  China Resources

Excellent diversification

The 3 months correlation between LIFE and China is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT 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 LIFE + 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 LIFE BANC SPLIT 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 LIFE + i.e., LIFE + and China Resources go up and down completely randomly.

Pair Corralation between LIFE + and China Resources

Assuming the 90 days horizon LIFE + is expected to generate 1.85 times less return on investment than China Resources. But when comparing it to its historical volatility, LIFE BANC SPLIT is 1.64 times less risky than China Resources. It trades about 0.06 of its potential returns per unit of risk. China Resources Land is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  157.00  in China Resources Land on October 5, 2024 and sell it today you would earn a total of  121.00  from holding China Resources Land or generate 77.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

LIFE BANC SPLIT  vs.  China Resources Land

LIFE BANC SPLIT

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days LIFE BANC SPLIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, LIFE + reported solid returns over the last few months and may actually be approaching a breakup point.

China Resources Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Land 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 LIFE + and China Resources

The main advantage of trading using opposite LIFE + and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE + 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 LIFE BANC SPLIT 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.