Correlation Between China Resources and Grasim Industries

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

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

Diversification Opportunities for China Resources and Grasim Industries

0.0

Correlation Coefficient

China Resources  Grasim Industries

Pay attention - limited upside

The 3 months correlation between China and Grasim is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Cement and Grasim Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grasim Industries and China Resources 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 China Resources Cement are associated (or correlated) with Grasim Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grasim Industries has no effect on the direction of China Resources i.e., China Resources and Grasim Industries go up and down completely randomly.

Pair Corralation between China Resources and Grasim Industries

If you would invest  555.00  in China Resources Cement on September 14, 2024 and sell it today you would earn a total of  149.00  from holding China Resources Cement or generate 26.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

China Resources Cement  vs.  Grasim Industries Limited

China Resources Cement

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, China Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Grasim Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Resources and Grasim Industries

The main advantage of trading using opposite China Resources and Grasim Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources position performs unexpectedly, Grasim Industries 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 Grasim Industries will offset losses from the drop in Grasim Industries' long position.

The idea behind China Resources Cement and Grasim Industries Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.