Correlation Between China Resources and Digital Bros

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

Diversification Opportunities for China Resources and Digital Bros

-0.76

Correlation Coefficient

China Resources  Digital Bros

Pay attention - limited upside

The 3 months correlation between China and Digital is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Digital Bros SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Bros SpA 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 Digital Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Bros SpA has no effect on the direction of China Resources i.e., China Resources and Digital Bros go up and down completely randomly.

Pair Corralation between China Resources and Digital Bros

Assuming the 90 days horizon China Resources Beer is expected to under-perform the Digital Bros. In addition to that, China Resources is 1.17 times more volatile than Digital Bros SpA. It trades about -0.06 of its total potential returns per unit of risk. Digital Bros SpA is currently generating about 0.1 per unit of volatility. If you would invest  991.00  in Digital Bros SpA on October 25, 2024 and sell it today you would earn a total of  157.00  from holding Digital Bros SpA or generate 15.84% return on investment over 90 days.

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

China Resources Beer  vs.  Digital Bros SpA

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Digital Bros SpA

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with China Resources and Digital Bros

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

The idea behind China Resources Beer and Digital Bros SpA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.