Correlation Between China Resources and SAN MIGUEL

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

Diversification Opportunities for China Resources and SAN MIGUEL

-0.01

Correlation Coefficient

China Resources  SAN MIGUEL

Good diversification

The 3 months correlation between China and SAN is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY 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 SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of China Resources i.e., China Resources and SAN MIGUEL go up and down completely randomly.

Pair Corralation between China Resources and SAN MIGUEL

Assuming the 90 days horizon China Resources Beer is expected to generate 0.67 times more return on investment than SAN MIGUEL. However, China Resources Beer is 1.5 times less risky than SAN MIGUEL. It trades about 0.03 of its potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about 0.0 per unit of risk. If you would invest  308.00  in China Resources Beer on December 19, 2024 and sell it today you would earn a total of  8.00  from holding China Resources Beer or generate 2.6% 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.  SAN MIGUEL BREWERY

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Resources and SAN MIGUEL

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

The idea behind China Resources Beer and SAN MIGUEL BREWERY 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.