Correlation Between China Resources and Dolly Varden

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

Diversification Opportunities for China Resources and Dolly Varden

0.29

Correlation Coefficient

China Resources  Dolly Varden

Modest diversification

The 3 months correlation between China and Dolly is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Dolly Varden Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolly Varden Silver 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 Dolly Varden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolly Varden Silver has no effect on the direction of China Resources i.e., China Resources and Dolly Varden go up and down completely randomly.

Pair Corralation between China Resources and Dolly Varden

Assuming the 90 days horizon China Resources is expected to generate 8.43 times less return on investment than Dolly Varden. But when comparing it to its historical volatility, China Resources Beer is 3.02 times less risky than Dolly Varden. It trades about 0.03 of its potential returns per unit of risk. Dolly Varden Silver is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Dolly Varden Silver on December 19, 2024 and sell it today you would earn a total of  13.00  from holding Dolly Varden Silver or generate 22.81% return on investment over 90 days.

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

China Resources Beer  vs.  Dolly Varden Silver

China Resources Beer

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dolly Varden Silver

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dolly Varden Silver are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dolly Varden reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Dolly Varden

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

The idea behind China Resources Beer and Dolly Varden Silver 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.