Correlation Between Aldel Financial and China Resources

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

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

Diversification Opportunities for Aldel Financial and China Resources

0.18

Correlation Coefficient

Aldel Financial  China Resources

Average diversification

The 3 months correlation between Aldel and China is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II 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 Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and China Resources go up and down completely randomly.

Pair Corralation between Aldel Financial and China Resources

Assuming the 90 days horizon Aldel Financial is expected to generate 41.87 times less return on investment than China Resources. But when comparing it to its historical volatility, Aldel Financial II is 37.94 times less risky than China Resources. It trades about 0.03 of its potential returns per unit of risk. China Resources Power is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  180.00  in China Resources Power on September 11, 2024 and sell it today you would earn a total of  45.00  from holding China Resources Power or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	10.21%
Values	Daily Returns

Aldel Financial II  vs.  China Resources Power

Aldel Financial II

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with Aldel Financial and China Resources

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

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..