Correlation Between China Resources and RETAIL FOOD

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

Diversification Opportunities for China Resources and RETAIL FOOD

0.66

Correlation Coefficient

China Resources  RETAIL FOOD

Poor diversification

The 3 months correlation between China and RETAIL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of China Resources i.e., China Resources and RETAIL FOOD go up and down completely randomly.

Pair Corralation between China Resources and RETAIL FOOD

Assuming the 90 days horizon China Resources Beer is expected to under-perform the RETAIL FOOD. But the stock apears to be less risky and, when comparing its historical volatility, China Resources Beer is 1.14 times less risky than RETAIL FOOD. The stock trades about -0.1 of its potential returns per unit of risk. The RETAIL FOOD GROUP is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  106.00  in RETAIL FOOD GROUP on March 24, 2025 and sell it today you would lose (8.00) from holding RETAIL FOOD GROUP or give up 7.55% of portfolio value over 90 days.

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

China Resources Beer  vs.  RETAIL FOOD GROUP

China Resources Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Resources Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

RETAIL FOOD GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Resources and RETAIL FOOD

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

The idea behind China Resources Beer and RETAIL FOOD GROUP 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.