Correlation Between China Resources and General Mills

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

Diversification Opportunities for China Resources and General Mills

-0.39

Correlation Coefficient

China Resources  General Mills

Very good diversification

The 3 months correlation between China and General is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of China Resources i.e., China Resources and General Mills go up and down completely randomly.

Pair Corralation between China Resources and General Mills

Assuming the 90 days horizon China Resources is expected to generate 3.52 times less return on investment than General Mills. In addition to that, China Resources is 2.38 times more volatile than General Mills. It trades about 0.02 of its total potential returns per unit of risk. General Mills is currently generating about 0.13 per unit of volatility. If you would invest  8,548  in General Mills on September 23, 2024 and sell it today you would earn a total of  346.00  from holding General Mills or generate 4.05% return on investment over 90 days.

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

China Resources Beer  vs.  General Mills

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.

General Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Mills unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and General Mills

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

The idea behind China Resources Beer and General Mills 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.