Correlation Between Loud Beverage and China Resources

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

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

Diversification Opportunities for Loud Beverage and China Resources

0.0

Correlation Coefficient

Loud Beverage  China Resources

Pay attention - limited upside

The 3 months correlation between Loud and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Loud Beverage Group 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 Loud Beverage 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 Loud Beverage Group 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 Loud Beverage i.e., Loud Beverage and China Resources go up and down completely randomly.

Pair Corralation between Loud Beverage and China Resources

Given the investment horizon of 90 days Loud Beverage Group is expected to generate 1.73 times more return on investment than China Resources. However, Loud Beverage is 1.73 times more volatile than China Resources Beer. It trades about 0.01 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.02 per unit of risk. If you would invest  6.00  in Loud Beverage Group on October 25, 2024 and sell it today you would lose (1.10) from holding Loud Beverage Group or give up 18.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Loud Beverage Group  vs.  China Resources Beer

Loud Beverage Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loud Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Loud Beverage is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Loud Beverage and China Resources

The main advantage of trading using opposite Loud Beverage and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loud Beverage 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 Loud Beverage Group 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 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.