Correlation Between APA and China Resources
Can any of the company-specific risk be diversified away by investing in both APA and China Resources 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 APA and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Group and China Resources Gas, you can compare the effects of market volatilities on APA and China Resources 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 APA with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and China Resources.
Diversification Opportunities for APA and China Resources
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between APA and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding APA Group and China Resources Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Gas and APA 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 APA Group are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Gas has no effect on the direction of APA i.e., APA and China Resources go up and down completely randomly.
Pair Corralation between APA and China Resources
Assuming the 90 days horizon APA Group is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, APA Group is 1.67 times less risky than China Resources. The stock trades about -0.02 of its potential returns per unit of risk. The China Resources Gas is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 314.00 in China Resources Gas on September 14, 2024 and sell it today you would earn a total of 46.00 from holding China Resources Gas or generate 14.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
APA Group vs. China Resources Gas
Performance |
Timeline |
APA Group |
China Resources Gas |
APA and China Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with APA and China Resources
The main advantage of trading using opposite APA and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.The idea behind APA Group and China Resources Gas 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.China Resources vs. USWE SPORTS AB | China Resources vs. Ming Le Sports | China Resources vs. Japan Asia Investment | China Resources vs. Playtech plc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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