Correlation Between China Resources and Suntory Beverage

Can any of the company-specific risk be diversified away by investing in both China Resources and Suntory Beverage 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 Suntory Beverage 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 Suntory Beverage Food, you can compare the effects of market volatilities on China Resources and Suntory Beverage 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 Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Suntory Beverage.

Diversification Opportunities for China Resources and Suntory Beverage

-0.36

Correlation Coefficient

China Resources  Suntory Beverage

Very good diversification

The 3 months correlation between China and Suntory is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of China Resources i.e., China Resources and Suntory Beverage go up and down completely randomly.

Pair Corralation between China Resources and Suntory Beverage

Assuming the 90 days horizon China Resources Beer is expected to generate 2.26 times more return on investment than Suntory Beverage. However, China Resources is 2.26 times more volatile than Suntory Beverage Food. It trades about 0.03 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.02 per unit of risk. If you would invest  316.00  in China Resources Beer on September 12, 2024 and sell it today you would earn a total of  22.00  from holding China Resources Beer or generate 6.96% return on investment over 90 days.

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

China Resources Beer  vs.  Suntory Beverage Food

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.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food 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 China Resources and Suntory Beverage

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

The idea behind China Resources Beer and Suntory Beverage Food 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.