Correlation Between Rinnai Corp and China Resources

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

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

Diversification Opportunities for Rinnai Corp and China Resources

0.0

Correlation Coefficient

Rinnai Corp  China Resources

Pay attention - limited upside

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

Pair Corralation between Rinnai Corp and China Resources

Assuming the 90 days horizon Rinnai Corp is expected to generate 0.23 times more return on investment than China Resources. However, Rinnai Corp is 4.44 times less risky than China Resources. It trades about 0.05 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  1,071  in Rinnai Corp on October 10, 2024 and sell it today you would earn a total of  136.00  from holding Rinnai Corp or generate 12.7% return on investment over 90 days.

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

Rinnai Corp  vs.  China Resources Beer

Rinnai Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rinnai Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Rinnai Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

China Resources Beer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 9 (%) 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 Rinnai Corp and China Resources

The main advantage of trading using opposite Rinnai Corp and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rinnai Corp 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 Rinnai Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.