Correlation Between China Resources and Coca Cola

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

Diversification Opportunities for China Resources and Coca Cola

0.69

Correlation Coefficient

China Resources  Coca Cola

Poor diversification

The 3 months correlation between China and Coca is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of China Resources i.e., China Resources and Coca Cola go up and down completely randomly.

Pair Corralation between China Resources and Coca Cola

Assuming the 90 days horizon China Resources Beer is expected to generate 2.76 times more return on investment than Coca Cola. However, China Resources is 2.76 times more volatile than The Coca Cola. It trades about 0.11 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.16 per unit of risk. If you would invest  261.00  in China Resources Beer on December 19, 2024 and sell it today you would earn a total of  57.00  from holding China Resources Beer or generate 21.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

China Resources Beer  vs.  The Coca Cola

China Resources Beer

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 8 (%) 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.

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Resources and Coca Cola

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

The idea behind China Resources Beer and The Coca Cola 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.