Correlation Between China Resources and Gladstone Investment

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

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

Diversification Opportunities for China Resources and Gladstone Investment

-0.3

Correlation Coefficient

China Resources  Gladstone Investment

Very good diversification

The 3 months correlation between China and Gladstone is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and China Resources 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 China Resources Beer are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of China Resources i.e., China Resources and Gladstone Investment go up and down completely randomly.

Pair Corralation between China Resources and Gladstone Investment

Assuming the 90 days horizon China Resources Beer is expected to generate 2.12 times more return on investment than Gladstone Investment. However, China Resources is 2.12 times more volatile than Gladstone Investment. It trades about 0.06 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.04 per unit of risk. If you would invest  250.00  in China Resources Beer on October 4, 2024 and sell it today you would earn a total of  60.00  from holding China Resources Beer or generate 24.0% return on investment over 90 days.

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

China Resources Beer  vs.  Gladstone Investment

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.

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gladstone Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Resources and Gladstone Investment

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

The idea behind China Resources Beer and Gladstone Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.