Correlation Between China Resources and TC Energy

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

Diversification Opportunities for China Resources and TC Energy

-0.52

Correlation Coefficient

China Resources  TC Energy

Excellent diversification

The 3 months correlation between China and TRS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of China Resources i.e., China Resources and TC Energy go up and down completely randomly.

Pair Corralation between China Resources and TC Energy

Assuming the 90 days horizon China Resources Beer is expected to under-perform the TC Energy. In addition to that, China Resources is 1.51 times more volatile than TC Energy. It trades about -0.05 of its total potential returns per unit of risk. TC Energy is currently generating about 0.16 per unit of volatility. If you would invest  4,348  in TC Energy on October 25, 2024 and sell it today you would earn a total of  197.00  from holding TC Energy or generate 4.53% 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.  TC Energy

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.

TC Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Resources and TC Energy

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

The idea behind China Resources Beer and TC Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.