Correlation Between China BlueChemical and Suntory Beverage

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

Diversification Opportunities for China BlueChemical and Suntory Beverage

-0.25

Correlation Coefficient

China BlueChemical  Suntory Beverage

Very good diversification

The 3 months correlation between China and Suntory is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical 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 BlueChemical 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 BlueChemical 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 BlueChemical i.e., China BlueChemical and Suntory Beverage go up and down completely randomly.

Pair Corralation between China BlueChemical and Suntory Beverage

Assuming the 90 days horizon China BlueChemical is expected to generate 1.87 times more return on investment than Suntory Beverage. However, China BlueChemical is 1.87 times more volatile than Suntory Beverage Food. It trades about 0.04 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.05 per unit of risk. If you would invest  24.00  in China BlueChemical on September 23, 2024 and sell it today you would earn a total of  1.00  from holding China BlueChemical or generate 4.17% return on investment over 90 days.

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

China BlueChemical  vs.  Suntory Beverage Food

China BlueChemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China BlueChemical 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 uncertain 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 BlueChemical and Suntory Beverage

The main advantage of trading using opposite China BlueChemical and Suntory Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical 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 BlueChemical 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.