Correlation Between China Resources and TROPHY GAMES

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

Diversification Opportunities for China Resources and TROPHY GAMES

0.4

Correlation Coefficient

China Resources  TROPHY GAMES

Very weak diversification

The 3 months correlation between China and TROPHY is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and TROPHY GAMES DEV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TROPHY GAMES DEV 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 TROPHY GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TROPHY GAMES DEV has no effect on the direction of China Resources i.e., China Resources and TROPHY GAMES go up and down completely randomly.

Pair Corralation between China Resources and TROPHY GAMES

Assuming the 90 days horizon China Resources is expected to generate 1.91 times less return on investment than TROPHY GAMES. In addition to that, China Resources is 1.04 times more volatile than TROPHY GAMES DEV. It trades about 0.05 of its total potential returns per unit of risk. TROPHY GAMES DEV is currently generating about 0.1 per unit of volatility. If you would invest  78.00  in TROPHY GAMES DEV on December 28, 2024 and sell it today you would earn a total of  12.00  from holding TROPHY GAMES DEV or generate 15.38% return on investment over 90 days.

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

China Resources Beer  vs.  TROPHY GAMES DEV

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 3 (%) 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.

TROPHY GAMES DEV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TROPHY GAMES DEV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TROPHY GAMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and TROPHY GAMES

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

The idea behind China Resources Beer and TROPHY GAMES DEV 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.