Correlation Between United Overseas and China Resources

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

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

Diversification Opportunities for United Overseas and China Resources

-0.77

Correlation Coefficient

United Overseas  China Resources

Pay attention - limited upside

The 3 months correlation between United and China is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land and United Overseas 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 United Overseas Bank 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 Land has no effect on the direction of United Overseas i.e., United Overseas and China Resources go up and down completely randomly.

Pair Corralation between United Overseas and China Resources

Assuming the 90 days horizon United Overseas Bank is expected to generate 0.48 times more return on investment than China Resources. However, United Overseas Bank is 2.09 times less risky than China Resources. It trades about 0.05 of its potential returns per unit of risk. China Resources Land is currently generating about 0.01 per unit of risk. If you would invest  2,615  in United Overseas Bank on October 10, 2024 and sell it today you would earn a total of  18.00  from holding United Overseas Bank or generate 0.69% return on investment over 90 days.

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

United Overseas Bank  vs.  China Resources Land

United Overseas Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

China Resources Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Land 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 United Overseas and China Resources

The main advantage of trading using opposite United Overseas and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Overseas 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 United Overseas Bank and China Resources Land 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.