Correlation Between China Resources and United Overseas

Can any of the company-specific risk be diversified away by investing in both China Resources and United Overseas 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 United Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Resources Land and United Overseas Bank, you can compare the effects of market volatilities on China Resources and United Overseas 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 United Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and United Overseas.

Diversification Opportunities for China Resources and United Overseas

-0.52

Correlation Coefficient

China Resources  United Overseas

Excellent diversification

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

Pair Corralation between China Resources and United Overseas

Assuming the 90 days horizon China Resources Land is expected to generate 3.53 times more return on investment than United Overseas. However, China Resources is 3.53 times more volatile than United Overseas Bank. It trades about 0.05 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.06 per unit of risk. If you would invest  135.00  in China Resources Land on September 23, 2024 and sell it today you would earn a total of  135.00  from holding China Resources Land or generate 100.0% 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 Land  vs.  United Overseas Bank

China Resources Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

United Overseas Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Resources and United Overseas

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

The idea behind China Resources Land and United Overseas Bank 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.