Correlation Between Guangzhou KingTeller and Tsingtao Brewery

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

By analyzing existing cross correlation between Guangzhou KingTeller Technology and Tsingtao Brewery Co, you can compare the effects of market volatilities on Guangzhou KingTeller and Tsingtao Brewery 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 Guangzhou KingTeller with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou KingTeller and Tsingtao Brewery.

Diversification Opportunities for Guangzhou KingTeller and Tsingtao Brewery

-0.2

Correlation Coefficient

Guangzhou KingTeller  Tsingtao Brewery

Good diversification

The 3 months correlation between Guangzhou and Tsingtao is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou KingTeller Technolog and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Guangzhou KingTeller 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 Guangzhou KingTeller Technology are associated (or correlated) with Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Guangzhou KingTeller i.e., Guangzhou KingTeller and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Guangzhou KingTeller and Tsingtao Brewery

Assuming the 90 days trading horizon Guangzhou KingTeller Technology is expected to under-perform the Tsingtao Brewery. In addition to that, Guangzhou KingTeller is 1.96 times more volatile than Tsingtao Brewery Co. It trades about -0.01 of its total potential returns per unit of risk. Tsingtao Brewery Co is currently generating about -0.01 per unit of volatility. If you would invest  7,900  in Tsingtao Brewery Co on December 28, 2024 and sell it today you would lose (143.00) from holding Tsingtao Brewery Co or give up 1.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Guangzhou KingTeller Technolog  vs.  Tsingtao Brewery Co

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

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

Tsingtao Brewery

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangzhou KingTeller and Tsingtao Brewery

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

The idea behind Guangzhou KingTeller Technology and Tsingtao Brewery Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.