Correlation Between China Resources and BYD ELECTRONIC

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

Diversification Opportunities for China Resources and BYD ELECTRONIC

0.19

Correlation Coefficient

China Resources  BYD ELECTRONIC

Average diversification

The 3 months correlation between China and BYD is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and BYD ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD ELECTRONIC 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 BYD ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD ELECTRONIC has no effect on the direction of China Resources i.e., China Resources and BYD ELECTRONIC go up and down completely randomly.

Pair Corralation between China Resources and BYD ELECTRONIC

Assuming the 90 days horizon China Resources Beer is expected to generate 0.52 times more return on investment than BYD ELECTRONIC. However, China Resources Beer is 1.93 times less risky than BYD ELECTRONIC. It trades about 0.07 of its potential returns per unit of risk. BYD ELECTRONIC is currently generating about 0.02 per unit of risk. If you would invest  310.00  in China Resources Beer on December 29, 2024 and sell it today you would earn a total of  30.00  from holding China Resources Beer or generate 9.68% return on investment over 90 days.

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

China Resources Beer  vs.  BYD ELECTRONIC

China Resources Beer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BYD ELECTRONIC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD ELECTRONIC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BYD ELECTRONIC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Resources and BYD ELECTRONIC

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

The idea behind China Resources Beer and BYD ELECTRONIC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.