Correlation Between Brockhaus Capital and China Resources

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

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

Diversification Opportunities for Brockhaus Capital and China Resources

0.71

Correlation Coefficient

Brockhaus Capital  China Resources

Poor diversification

The 3 months correlation between Brockhaus and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Brockhaus Capital Management and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and Brockhaus Capital 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 Brockhaus Capital Management 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 Beer has no effect on the direction of Brockhaus Capital i.e., Brockhaus Capital and China Resources go up and down completely randomly.

Pair Corralation between Brockhaus Capital and China Resources

Assuming the 90 days trading horizon Brockhaus Capital Management is expected to generate 0.72 times more return on investment than China Resources. However, Brockhaus Capital Management is 1.38 times less risky than China Resources. It trades about -0.1 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.08 per unit of risk. If you would invest  2,790  in Brockhaus Capital Management on October 20, 2024 and sell it today you would lose (420.00) from holding Brockhaus Capital Management or give up 15.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Brockhaus Capital Management  vs.  China Resources Beer

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management 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 technical 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.

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Beer 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 Brockhaus Capital and China Resources

The main advantage of trading using opposite Brockhaus Capital and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brockhaus Capital 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 Brockhaus Capital Management and China Resources Beer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.