Correlation Between Do Fluoride and Tsingtao Brewery

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

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

Diversification Opportunities for Do Fluoride and Tsingtao Brewery

0.23

Correlation Coefficient

Do Fluoride  Tsingtao Brewery

Modest diversification

The 3 months correlation between 002407 and Tsingtao is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Do Fluoride Chemicals Co and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Do Fluoride 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 Do Fluoride Chemicals Co 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 Do Fluoride i.e., Do Fluoride and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Do Fluoride and Tsingtao Brewery

Assuming the 90 days trading horizon Do Fluoride is expected to generate 8.39 times less return on investment than Tsingtao Brewery. In addition to that, Do Fluoride is 1.29 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 0.06 per unit of volatility. If you would invest  7,065  in Tsingtao Brewery Co on October 11, 2024 and sell it today you would earn a total of  501.00  from holding Tsingtao Brewery Co or generate 7.09% return on investment over 90 days.

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

Do Fluoride Chemicals Co  vs.  Tsingtao Brewery Co

Do Fluoride Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Do Fluoride Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Do Fluoride 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

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsingtao Brewery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Do Fluoride and Tsingtao Brewery

The main advantage of trading using opposite Do Fluoride and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Do Fluoride 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 Do Fluoride Chemicals Co 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.