Correlation Between China Resources and Loews Corp

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

Diversification Opportunities for China Resources and Loews Corp

-0.74

Correlation Coefficient

China Resources  Loews Corp

Pay attention - limited upside

The 3 months correlation between China and Loews is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of China Resources i.e., China Resources and Loews Corp go up and down completely randomly.

Pair Corralation between China Resources and Loews Corp

Assuming the 90 days horizon China Resources Beer is expected to generate 3.42 times more return on investment than Loews Corp. However, China Resources is 3.42 times more volatile than Loews Corp. It trades about -0.03 of its potential returns per unit of risk. Loews Corp is currently generating about -0.13 per unit of risk. If you would invest  318.00  in China Resources Beer on October 2, 2024 and sell it today you would lose (8.00) from holding China Resources Beer or give up 2.52% of portfolio value over 90 days.

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

China Resources Beer  vs.  Loews Corp

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Loews Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Loews Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Loews Corp

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

The idea behind China Resources Beer and Loews Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.