Correlation Between Information Services and China Resources

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

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

Diversification Opportunities for Information Services and China Resources

-0.02

Correlation Coefficient

Information Services  China Resources

Good diversification

The 3 months correlation between Information and China is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Internati and China Resources Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Gas and Information Services 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 Information Services International Dentsu 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 Gas has no effect on the direction of Information Services i.e., Information Services and China Resources go up and down completely randomly.

Pair Corralation between Information Services and China Resources

Assuming the 90 days horizon Information Services International Dentsu is expected to generate 0.59 times more return on investment than China Resources. However, Information Services International Dentsu is 1.69 times less risky than China Resources. It trades about 0.03 of its potential returns per unit of risk. China Resources Gas is currently generating about -0.07 per unit of risk. If you would invest  3,360  in Information Services International Dentsu on October 25, 2024 and sell it today you would earn a total of  40.00  from holding Information Services International Dentsu or generate 1.19% return on investment over 90 days.

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

Information Services Internati  vs.  China Resources Gas

Information Services

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Resources Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Gas 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 Information Services and China Resources

The main advantage of trading using opposite Information Services and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services International Dentsu and China Resources Gas 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.