Correlation Between SIERRA METALS and China Resources

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

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

Diversification Opportunities for SIERRA METALS and China Resources

0.08

Correlation Coefficient

SIERRA METALS  China Resources

Significant diversification

The 3 months correlation between SIERRA and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and SIERRA METALS 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 SIERRA METALS are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and China Resources go up and down completely randomly.

Pair Corralation between SIERRA METALS and China Resources

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 0.74 times more return on investment than China Resources. However, SIERRA METALS is 1.35 times less risky than China Resources. It trades about 0.2 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.18 per unit of risk. If you would invest  54.00  in SIERRA METALS on October 25, 2024 and sell it today you would earn a total of  4.00  from holding SIERRA METALS or generate 7.41% return on investment over 90 days.

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

SIERRA METALS  vs.  China Resources Beer

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SIERRA METALS and China Resources

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

The idea behind SIERRA METALS and China Resources Beer 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.