Correlation Between Williams Sonoma and China Resources

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

By analyzing existing cross correlation between Williams Sonoma and China Resources Power, you can compare the effects of market volatilities on Williams Sonoma 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 Williams Sonoma with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williams Sonoma and China Resources.

Diversification Opportunities for Williams Sonoma and China Resources

-0.35

Correlation Coefficient

Williams Sonoma  China Resources

Very good diversification

The 3 months correlation between Williams and China is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power and Williams Sonoma 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 Williams Sonoma 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 Power has no effect on the direction of Williams Sonoma i.e., Williams Sonoma and China Resources go up and down completely randomly.

Pair Corralation between Williams Sonoma and China Resources

Considering the 90-day investment horizon Williams Sonoma is expected to generate 2.16 times more return on investment than China Resources. However, Williams Sonoma is 2.16 times more volatile than China Resources Power. It trades about 0.09 of its potential returns per unit of risk. China Resources Power is currently generating about -0.07 per unit of risk. If you would invest  15,282  in Williams Sonoma on September 23, 2024 and sell it today you would earn a total of  3,086  from holding Williams Sonoma or generate 20.19% return on investment over 90 days.

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

Williams Sonoma  vs.  China Resources Power

Williams Sonoma

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

China Resources Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Williams Sonoma and China Resources

The main advantage of trading using opposite Williams Sonoma and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williams Sonoma 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 Williams Sonoma and China Resources Power 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.