Correlation Between China Resources and Goldman Sachs

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

Diversification Opportunities for China Resources and Goldman Sachs

0.18

Correlation Coefficient

China Resources  Goldman Sachs

Average diversification

The 3 months correlation between China and Goldman is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of China Resources i.e., China Resources and Goldman Sachs go up and down completely randomly.

Pair Corralation between China Resources and Goldman Sachs

Assuming the 90 days horizon China Resources Beer is expected to under-perform the Goldman Sachs. In addition to that, China Resources is 1.04 times more volatile than The Goldman Sachs. It trades about -0.06 of its total potential returns per unit of risk. The Goldman Sachs is currently generating about 0.26 per unit of volatility. If you would invest  46,755  in The Goldman Sachs on September 5, 2024 and sell it today you would earn a total of  10,445  from holding The Goldman Sachs or generate 22.34% return on investment over 90 days.

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

China Resources Beer  vs.  The Goldman Sachs

China Resources Beer

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 6 (%) 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.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goldman Sachs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Goldman Sachs

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

The idea behind China Resources Beer and The Goldman Sachs 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..