Correlation Between SAN MIGUEL and China Resources

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

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

Diversification Opportunities for SAN MIGUEL and China Resources

0.61

Correlation Coefficient

SAN MIGUEL  China Resources

Poor diversification

The 3 months correlation between SAN and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY 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 SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and China Resources go up and down completely randomly.

Pair Corralation between SAN MIGUEL and China Resources

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to generate 0.84 times more return on investment than China Resources. However, SAN MIGUEL BREWERY is 1.19 times less risky than China Resources. It trades about -0.24 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.29 per unit of risk. If you would invest  11.00  in SAN MIGUEL BREWERY on October 11, 2024 and sell it today you would lose (1.00) from holding SAN MIGUEL BREWERY or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

SAN MIGUEL BREWERY  vs.  China Resources Beer

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 fragile 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 SAN MIGUEL and China Resources

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

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.