Correlation Between Davidstea and China Resources

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

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

Diversification Opportunities for Davidstea and China Resources

-0.46

Correlation Coefficient

Davidstea  China Resources

Very good diversification

The 3 months correlation between Davidstea and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Davidstea and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and Davidstea 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 Davidstea 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 Beer has no effect on the direction of Davidstea i.e., Davidstea and China Resources go up and down completely randomly.

Pair Corralation between Davidstea and China Resources

If you would invest  424.00  in China Resources Beer on January 30, 2024 and sell it today you would earn a total of  0.00  from holding China Resources Beer or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

Davidstea  vs.  China Resources Beer

Davidstea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davidstea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Davidstea is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

China Resources Beer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davidstea and China Resources

The main advantage of trading using opposite Davidstea and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davidstea 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 Davidstea and China Resources Beer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.