Correlation Between Chuangs China and Bannerman Resources

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

By analyzing existing cross correlation between Chuangs China Investments and Bannerman Resources Limited, you can compare the effects of market volatilities on Chuangs China and Bannerman Resources 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 Chuangs China with a short position of Bannerman Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Bannerman Resources.

Diversification Opportunities for Chuangs China and Bannerman Resources

0.13

Correlation Coefficient

Chuangs China  Bannerman Resources

Average diversification

The 3 months correlation between Chuangs and Bannerman is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Chuangs China i.e., Chuangs China and Bannerman Resources go up and down completely randomly.

Pair Corralation between Chuangs China and Bannerman Resources

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the Bannerman Resources. In addition to that, Chuangs China is 1.15 times more volatile than Bannerman Resources Limited. It trades about -0.01 of its total potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.04 per unit of volatility. If you would invest  117.00  in Bannerman Resources Limited on September 28, 2024 and sell it today you would earn a total of  55.00  from holding Bannerman Resources Limited or generate 47.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chuangs China Investments  vs.  Bannerman Resources Limited

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bannerman Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bannerman Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chuangs China and Bannerman Resources

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

The idea behind Chuangs China Investments and Bannerman Resources Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.