Correlation Between DATATEC and China Resources

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

By analyzing existing cross correlation between DATATEC LTD 2 and China Resources Beer, you can compare the effects of market volatilities on DATATEC 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 DATATEC with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and China Resources.

Diversification Opportunities for DATATEC and China Resources

-0.7

Correlation Coefficient

DATATEC  China Resources

Excellent diversification

The 3 months correlation between DATATEC and China is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 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 DATATEC 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 DATATEC LTD 2 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 DATATEC i.e., DATATEC and China Resources go up and down completely randomly.

Pair Corralation between DATATEC and China Resources

Assuming the 90 days trading horizon DATATEC LTD 2 is expected to generate 0.75 times more return on investment than China Resources. However, DATATEC LTD 2 is 1.33 times less risky than China Resources. It trades about 0.17 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.03 per unit of risk. If you would invest  493.00  in DATATEC LTD 2 on April 22, 2025 and sell it today you would earn a total of  92.00  from holding DATATEC LTD 2 or generate 18.66% return on investment over 90 days.

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

DATATEC LTD 2  vs.  China Resources Beer

DATATEC LTD 2

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with DATATEC and China Resources

The main advantage of trading using opposite DATATEC and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATATEC 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 DATATEC LTD 2 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.