Correlation Between China Resources and KIMBALL ELECTRONICS

Can any of the company-specific risk be diversified away by investing in both China Resources and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS, you can compare the effects of market volatilities on China Resources and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and KIMBALL ELECTRONICS.

Diversification Opportunities for China Resources and KIMBALL ELECTRONICS

0.09

Correlation Coefficient

China Resources  KIMBALL ELECTRONICS

Significant diversification

The 3 months correlation between China and KIMBALL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of China Resources i.e., China Resources and KIMBALL ELECTRONICS go up and down completely randomly.

Pair Corralation between China Resources and KIMBALL ELECTRONICS

Assuming the 90 days horizon China Resources Beer is expected to generate 1.62 times more return on investment than KIMBALL ELECTRONICS. However, China Resources is 1.62 times more volatile than KIMBALL ELECTRONICS. It trades about 0.0 of its potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest  312.00  in China Resources Beer on November 29, 2024 and sell it today you would lose (6.00) from holding China Resources Beer or give up 1.92% of portfolio value over 90 days.

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

China Resources Beer  vs.  KIMBALL ELECTRONICS

China Resources Beer

Risk-Adjusted Performance

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 nearly stable basic indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KIMBALL ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIMBALL ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS

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

The idea behind China Resources Beer and KIMBALL ELECTRONICS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.