Correlation Between Shijiazhuang Tonhe and Kweichow Moutai

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

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

Diversification Opportunities for Shijiazhuang Tonhe and Kweichow Moutai

0.13

Correlation Coefficient

Shijiazhuang Tonhe  Kweichow Moutai

Average diversification

The 3 months correlation between Shijiazhuang and Kweichow is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Shijiazhuang Tonhe Electronics and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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 Shijiazhuang Tonhe i.e., Shijiazhuang Tonhe and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Shijiazhuang Tonhe and Kweichow Moutai

Assuming the 90 days trading horizon Shijiazhuang Tonhe Electronics is expected to generate 2.6 times more return on investment than Kweichow Moutai. However, Shijiazhuang Tonhe is 2.6 times more volatile than Kweichow Moutai Co. It trades about 0.02 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.03 per unit of risk. If you would invest  1,607  in Shijiazhuang Tonhe Electronics on October 13, 2024 and sell it today you would lose (112.00) from holding Shijiazhuang Tonhe Electronics or give up 6.97% of portfolio value over 90 days.

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

Shijiazhuang Tonhe Electronics  vs.  Kweichow Moutai Co

Shijiazhuang Tonhe

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shijiazhuang Tonhe and Kweichow Moutai

The main advantage of trading using opposite Shijiazhuang Tonhe and Kweichow Moutai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.