Correlation Between China Resources and Platinum Investment

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

Diversification Opportunities for China Resources and Platinum Investment

-0.4

Correlation Coefficient

China Resources  Platinum Investment

Very good diversification

The 3 months correlation between China and Platinum is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment 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 Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of China Resources i.e., China Resources and Platinum Investment go up and down completely randomly.

Pair Corralation between China Resources and Platinum Investment

Assuming the 90 days horizon China Resources Beer is expected to generate 0.61 times more return on investment than Platinum Investment. However, China Resources Beer is 1.65 times less risky than Platinum Investment. It trades about -0.01 of its potential returns per unit of risk. Platinum Investment Management is currently generating about -0.03 per unit of risk. If you would invest  316.00  in China Resources Beer on December 4, 2024 and sell it today you would lose (12.00) from holding China Resources Beer or give up 3.8% of portfolio value over 90 days.

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

China Resources Beer  vs.  Platinum Investment Management

China Resources Beer

Risk-Adjusted Performance

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 nearly stable basic indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Platinum Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Platinum Investment Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Resources and Platinum Investment

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

The idea behind China Resources Beer and Platinum Investment Management 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 Anywhere module to track or share privately all of your investments from the convenience of any device.