Correlation Between China Resources and TV BROADCAST

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

Diversification Opportunities for China Resources and TV BROADCAST

-0.17

Correlation Coefficient

China Resources  TV BROADCAST

Good diversification

The 3 months correlation between China and TBCN is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and TV BROADCAST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TV BROADCAST 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 TV BROADCAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TV BROADCAST has no effect on the direction of China Resources i.e., China Resources and TV BROADCAST go up and down completely randomly.

Pair Corralation between China Resources and TV BROADCAST

Assuming the 90 days horizon China Resources Beer is expected to under-perform the TV BROADCAST. In addition to that, China Resources is 3.05 times more volatile than TV BROADCAST. It trades about -0.11 of its total potential returns per unit of risk. TV BROADCAST is currently generating about 0.31 per unit of volatility. If you would invest  35.00  in TV BROADCAST on April 5, 2025 and sell it today you would earn a total of  2.00  from holding TV BROADCAST or generate 5.71% return on investment over 90 days.

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

China Resources Beer  vs.  TV BROADCAST

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 nearly stable basic indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TV BROADCAST

Risk-Adjusted Performance

Very Weak

Over the last 90 days TV BROADCAST has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TV BROADCAST is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China Resources and TV BROADCAST

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

The idea behind China Resources Beer and TV BROADCAST 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.