Correlation Between China Resources and EOG Resources

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

Diversification Opportunities for China Resources and EOG Resources

-0.5

Correlation Coefficient

China Resources  EOG Resources

Very good diversification

The 3 months correlation between China and EOG is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources 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 EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of China Resources i.e., China Resources and EOG Resources go up and down completely randomly.

Pair Corralation between China Resources and EOG Resources

Assuming the 90 days horizon China Resources Beer is expected to generate 1.54 times more return on investment than EOG Resources. However, China Resources is 1.54 times more volatile than EOG Resources. It trades about 0.02 of its potential returns per unit of risk. EOG Resources is currently generating about 0.0 per unit of risk. If you would invest  312.00  in China Resources Beer on December 20, 2024 and sell it today you would earn a total of  4.00  from holding China Resources Beer or generate 1.28% 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.  EOG Resources

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 1 (%) 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.

EOG Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days EOG Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EOG Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Resources and EOG Resources

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

The idea behind China Resources Beer and EOG Resources 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 Commodity Directory module to find actively traded commodities issued by global exchanges.