Correlation Between Gan Yuan and Tsingtao Brewery

Can any of the company-specific risk be diversified away by investing in both Gan Yuan 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 Gan Yuan and Tsingtao Brewery 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 Tsingtao Brewery Co, you can compare the effects of market volatilities on Gan Yuan 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 Gan Yuan with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gan Yuan and Tsingtao Brewery.

Diversification Opportunities for Gan Yuan and Tsingtao Brewery

0.72

Correlation Coefficient

Gan Yuan  Tsingtao Brewery

Poor diversification

The 3 months correlation between Gan and Tsingtao is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gan Yuan Foods and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 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 Gan Yuan i.e., Gan Yuan and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Gan Yuan and Tsingtao Brewery

Assuming the 90 days trading horizon Gan Yuan Foods is expected to generate 1.68 times more return on investment than Tsingtao Brewery. However, Gan Yuan is 1.68 times more volatile than Tsingtao Brewery Co. It trades about -0.05 of its potential returns per unit of risk. Tsingtao Brewery Co is currently generating about -0.29 per unit of risk. If you would invest  8,885  in Gan Yuan Foods on October 26, 2024 and sell it today you would lose (323.00) from holding Gan Yuan Foods or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Gan Yuan Foods  vs.  Tsingtao Brewery Co

Gan Yuan Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gan Yuan Foods are ranked lower than 10 (%) 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.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

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 Gan Yuan and Tsingtao Brewery

The main advantage of trading using opposite Gan Yuan and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gan Yuan 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 Gan Yuan Foods 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.