Correlation Between Poste Italiane and China Resources

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

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

Diversification Opportunities for Poste Italiane and China Resources

-0.25

Correlation Coefficient

Poste Italiane  China Resources

Very good diversification

The 3 months correlation between Poste and China is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Poste Italiane SpA 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 Poste Italiane 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 Poste Italiane SpA 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 Poste Italiane i.e., Poste Italiane and China Resources go up and down completely randomly.

Pair Corralation between Poste Italiane and China Resources

Assuming the 90 days horizon Poste Italiane is expected to generate 2.07 times less return on investment than China Resources. But when comparing it to its historical volatility, Poste Italiane SpA is 4.28 times less risky than China Resources. It trades about 0.14 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  156.00  in China Resources Land on October 10, 2024 and sell it today you would earn a total of  112.00  from holding China Resources Land or generate 71.79% return on investment over 90 days.

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

Poste Italiane SpA  vs.  China Resources Land

Poste Italiane SpA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Poste Italiane SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Poste Italiane may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Poste Italiane and China Resources

The main advantage of trading using opposite Poste Italiane and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poste Italiane 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 Poste Italiane SpA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.