Correlation Between China Resources and ACCO Brands

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

Diversification Opportunities for China Resources and ACCO Brands

-0.49

Correlation Coefficient

China Resources  ACCO Brands

Very good diversification

The 3 months correlation between China and ACCO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and ACCO Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACCO Brands 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 ACCO Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACCO Brands has no effect on the direction of China Resources i.e., China Resources and ACCO Brands go up and down completely randomly.

Pair Corralation between China Resources and ACCO Brands

Assuming the 90 days horizon China Resources Beer is expected to generate 1.78 times more return on investment than ACCO Brands. However, China Resources is 1.78 times more volatile than ACCO Brands. It trades about 0.05 of its potential returns per unit of risk. ACCO Brands is currently generating about 0.08 per unit of risk. If you would invest  260.00  in China Resources Beer on September 27, 2024 and sell it today you would earn a total of  52.00  from holding China Resources Beer or generate 20.0% return on investment over 90 days.

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

China Resources Beer  vs.  ACCO Brands

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ACCO Brands

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with China Resources and ACCO Brands

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

The idea behind China Resources Beer and ACCO Brands 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.