Correlation Between China Resources and NRG Energy
Can any of the company-specific risk be diversified away by investing in both China Resources and NRG Energy 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 NRG Energy 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 NRG Energy, you can compare the effects of market volatilities on China Resources and NRG Energy 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 NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and NRG Energy.
Diversification Opportunities for China Resources and NRG Energy
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and NRG is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy 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 NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of China Resources i.e., China Resources and NRG Energy go up and down completely randomly.
Pair Corralation between China Resources and NRG Energy
Assuming the 90 days horizon China Resources Beer is expected to generate 0.74 times more return on investment than NRG Energy. However, China Resources Beer is 1.36 times less risky than NRG Energy. It trades about 0.03 of its potential returns per unit of risk. NRG Energy is currently generating about 0.01 per unit of risk. If you would invest 308.00 in China Resources Beer on December 18, 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 | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
China Resources Beer vs. NRG Energy
Performance |
Timeline |
China Resources Beer |
NRG Energy |
China Resources and NRG Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Resources and NRG Energy
The main advantage of trading using opposite China Resources and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, NRG Energy 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 NRG Energy will offset losses from the drop in NRG Energy's long position.China Resources vs. Tsingtao Brewery | China Resources vs. THAI BEVERAGE | China Resources vs. VARIOUS EATERIES LS | China Resources vs. Suntory Beverage Food |
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Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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