Correlation Between Gan Yuan and Kweichow Moutai

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

By analyzing existing cross correlation between Gan Yuan Foods and Kweichow Moutai Co, you can compare the effects of market volatilities on Gan Yuan and Kweichow Moutai 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 Gan Yuan with a short position of Kweichow Moutai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gan Yuan and Kweichow Moutai.

Diversification Opportunities for Gan Yuan and Kweichow Moutai

-0.39

Correlation Coefficient

Gan Yuan  Kweichow Moutai

Very good diversification

The 3 months correlation between Gan and Kweichow is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Gan Yuan 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 Gan Yuan Foods are associated (or correlated) with Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Gan Yuan i.e., Gan Yuan and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Gan Yuan and Kweichow Moutai

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 2.12 times more return on investment than Kweichow Moutai. However, Gan Yuan is 2.12 times more volatile than Kweichow Moutai Co. It trades about 0.33 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.11 per unit of risk. If you would invest  7,569  in Gan Yuan Foods on October 8, 2024 and sell it today you would earn a total of  1,400  from holding Gan Yuan Foods or generate 18.5% return on investment over 90 days.

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

Gan Yuan Foods  vs.  Kweichow Moutai Co

Gan Yuan Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gan Yuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Kweichow Moutai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kweichow Moutai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gan Yuan and Kweichow Moutai

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

The idea behind Gan Yuan Foods and Kweichow Moutai 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.