Correlation Between China Resources and NEWELL RUBBERMAID

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

Diversification Opportunities for China Resources and NEWELL RUBBERMAID

-0.64

Correlation Coefficient

China Resources  NEWELL RUBBERMAID

Excellent diversification

The 3 months correlation between China and NEWELL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and NEWELL RUBBERMAID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEWELL RUBBERMAID 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 NEWELL RUBBERMAID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEWELL RUBBERMAID has no effect on the direction of China Resources i.e., China Resources and NEWELL RUBBERMAID go up and down completely randomly.

Pair Corralation between China Resources and NEWELL RUBBERMAID

Assuming the 90 days horizon China Resources Beer is expected to under-perform the NEWELL RUBBERMAID. But the stock apears to be less risky and, when comparing its historical volatility, China Resources Beer is 1.13 times less risky than NEWELL RUBBERMAID. The stock trades about -0.01 of its potential returns per unit of risk. The NEWELL RUBBERMAID is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,363  in NEWELL RUBBERMAID on October 25, 2024 and sell it today you would lose (386.00) from holding NEWELL RUBBERMAID or give up 28.32% 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.  NEWELL RUBBERMAID

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

NEWELL RUBBERMAID

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with China Resources and NEWELL RUBBERMAID

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

The idea behind China Resources Beer and NEWELL RUBBERMAID 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.