Correlation Between China Resources and Corporate Travel

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

By analyzing existing cross correlation between China Resources Beer and Corporate Travel Management, you can compare the effects of market volatilities on China Resources and Corporate Travel 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 Corporate Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Corporate Travel.

Diversification Opportunities for China Resources and Corporate Travel

0.15

Correlation Coefficient

China Resources  Corporate Travel

Average diversification

The 3 months correlation between China and Corporate is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Corporate Travel Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Travel Man 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 Beer are associated (or correlated) with Corporate Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Travel Man has no effect on the direction of China Resources i.e., China Resources and Corporate Travel go up and down completely randomly.

Pair Corralation between China Resources and Corporate Travel

Assuming the 90 days horizon China Resources Beer is expected to generate 1.3 times more return on investment than Corporate Travel. However, China Resources is 1.3 times more volatile than Corporate Travel Management. It trades about 0.0 of its potential returns per unit of risk. Corporate Travel Management is currently generating about -0.02 per unit of risk. If you would invest  402.00  in China Resources Beer on September 12, 2024 and sell it today you would lose (64.00) from holding China Resources Beer or give up 15.92% of portfolio value over 90 days.

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

China Resources Beer  vs.  Corporate Travel Management

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 fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Corporate Travel Man

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corporate Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Corporate Travel

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

The idea behind China Resources Beer and Corporate Travel Management 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.