Correlation Between China Resources and Graphjet Technology

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

Diversification Opportunities for China Resources and Graphjet Technology

-0.48

Correlation Coefficient

China Resources  Graphjet Technology

Very good diversification

The 3 months correlation between China and Graphjet is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Graphjet Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphjet Technology 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 Graphjet Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphjet Technology has no effect on the direction of China Resources i.e., China Resources and Graphjet Technology go up and down completely randomly.

Pair Corralation between China Resources and Graphjet Technology

Assuming the 90 days horizon China Resources is expected to generate 3.55 times less return on investment than Graphjet Technology. But when comparing it to its historical volatility, China Resources Beer is 11.51 times less risky than Graphjet Technology. It trades about 0.07 of its potential returns per unit of risk. Graphjet Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Graphjet Technology on October 25, 2024 and sell it today you would lose (184.00) from holding Graphjet Technology or give up 84.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

China Resources Beer  vs.  Graphjet Technology

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.

Graphjet Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphjet Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Graphjet Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Graphjet Technology

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

The idea behind China Resources Beer and Graphjet Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.