Correlation Between China Resources and Codexis

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

Diversification Opportunities for China Resources and Codexis

0.3

Correlation Coefficient

China Resources  Codexis

Weak diversification

The 3 months correlation between China and Codexis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of China Resources i.e., China Resources and Codexis go up and down completely randomly.

Pair Corralation between China Resources and Codexis

Assuming the 90 days horizon China Resources Beer is expected to under-perform the Codexis. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Resources Beer is 2.14 times less risky than Codexis. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  670.00  in Codexis on October 24, 2024 and sell it today you would lose (171.00) from holding Codexis or give up 25.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

China Resources Beer  vs.  Codexis

China Resources Beer

Risk-Adjusted Performance

5 of 100

Modest

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

Codexis

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Codexis

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

The idea behind China Resources Beer and Codexis 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.