Correlation Between National Storage and China Resources

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

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

Diversification Opportunities for National Storage and China Resources

-0.16

Correlation Coefficient

National Storage  China Resources

Good diversification

The 3 months correlation between National and China is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates 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 National Storage 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 National Storage Affiliates 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 National Storage i.e., National Storage and China Resources go up and down completely randomly.

Pair Corralation between National Storage and China Resources

Assuming the 90 days horizon National Storage Affiliates is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, National Storage Affiliates is 2.47 times less risky than China Resources. The stock trades about -0.13 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  304.00  in China Resources Beer on September 24, 2024 and sell it today you would earn a total of  8.00  from holding China Resources Beer or generate 2.63% return on investment over 90 days.

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

National Storage Affiliates  vs.  China Resources Beer

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage Affiliates 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Resources Beer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Storage and China Resources

The main advantage of trading using opposite National Storage and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage 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 National Storage Affiliates 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.