Correlation Between China Resources and Wharf Holdings

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

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

Diversification Opportunities for China Resources and Wharf Holdings

0.67

Correlation Coefficient

China Resources  Wharf Holdings

Poor diversification

The 3 months correlation between China and Wharf is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Land and Wharf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Holdings 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 Land are associated (or correlated) with Wharf Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Holdings has no effect on the direction of China Resources i.e., China Resources and Wharf Holdings go up and down completely randomly.

Pair Corralation between China Resources and Wharf Holdings

Assuming the 90 days horizon China Resources Land is expected to generate 0.54 times more return on investment than Wharf Holdings. However, China Resources Land is 1.84 times less risky than Wharf Holdings. It trades about 0.07 of its potential returns per unit of risk. Wharf Holdings is currently generating about 0.02 per unit of risk. If you would invest  2,808  in China Resources Land on September 3, 2024 and sell it today you would earn a total of  230.00  from holding China Resources Land or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

China Resources Land  vs.  Wharf Holdings

China Resources Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wharf Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wharf Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Wharf Holdings 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 Wharf Holdings

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

The idea behind China Resources Land and Wharf Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.