Correlation Between China Resources and Longfor Group

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

Diversification Opportunities for China Resources and Longfor Group

-0.82

Correlation Coefficient

China Resources  Longfor Group

Pay attention - limited upside

The 3 months correlation between China and Longfor is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Land and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group Holdings 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 Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of China Resources i.e., China Resources and Longfor Group go up and down completely randomly.

Pair Corralation between China Resources and Longfor Group

Assuming the 90 days horizon China Resources Land is expected to generate 0.27 times more return on investment than Longfor Group. However, China Resources Land is 3.7 times less risky than Longfor Group. It trades about 0.22 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about -0.08 per unit of risk. If you would invest  2,890  in China Resources Land on December 29, 2024 and sell it today you would earn a total of  680.00  from holding China Resources Land or generate 23.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

China Resources Land  vs.  Longfor Group Holdings

China Resources Land

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, China Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Longfor Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China Resources and Longfor Group

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

The idea behind China Resources Land and Longfor Group Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.