Correlation Between NEXTDC and Tsingtao Brewery

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

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

Diversification Opportunities for NEXTDC and Tsingtao Brewery

0.32

Correlation Coefficient

NEXTDC  Tsingtao Brewery

Weak diversification

The 3 months correlation between NEXTDC and Tsingtao is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NEXTDC LTD and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and NEXTDC 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 NEXTDC LTD 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 NEXTDC i.e., NEXTDC and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between NEXTDC and Tsingtao Brewery

Assuming the 90 days horizon NEXTDC LTD is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, NEXTDC LTD is 1.72 times less risky than Tsingtao Brewery. The stock trades about -0.07 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  474.00  in Tsingtao Brewery on September 18, 2024 and sell it today you would earn a total of  198.00  from holding Tsingtao Brewery or generate 41.77% return on investment over 90 days.

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

NEXTDC LTD  vs.  Tsingtao Brewery

NEXTDC LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXTDC and Tsingtao Brewery

The main advantage of trading using opposite NEXTDC and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXTDC 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 NEXTDC LTD and Tsingtao Brewery 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .