Correlation Between China Resources and BOSTON BEER

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

Diversification Opportunities for China Resources and BOSTON BEER

0.28

Correlation Coefficient

China Resources  BOSTON BEER

Modest diversification

The 3 months correlation between China and BOSTON is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A 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 BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of China Resources i.e., China Resources and BOSTON BEER go up and down completely randomly.

Pair Corralation between China Resources and BOSTON BEER

Assuming the 90 days horizon China Resources Beer is expected to under-perform the BOSTON BEER. In addition to that, China Resources is 1.51 times more volatile than BOSTON BEER A . It trades about -0.01 of its total potential returns per unit of risk. BOSTON BEER A is currently generating about -0.01 per unit of volatility. If you would invest  33,985  in BOSTON BEER A on September 3, 2024 and sell it today you would lose (5,005) from holding BOSTON BEER A or give up 14.73% of portfolio value over 90 days.

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

China Resources Beer  vs.  BOSTON BEER A

China Resources Beer

Risk-Adjusted Performance

5 of 100

Modest

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 fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

BOSTON BEER A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and BOSTON BEER

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

The idea behind China Resources Beer and BOSTON BEER A 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.