Correlation Between Vats Liquor and Chongqing Road

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

By analyzing existing cross correlation between Vats Liquor Chain and Chongqing Road Bridge, you can compare the effects of market volatilities on Vats Liquor and Chongqing Road 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 Vats Liquor with a short position of Chongqing Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Chongqing Road.

Diversification Opportunities for Vats Liquor and Chongqing Road

0.31

Correlation Coefficient

Vats Liquor  Chongqing Road

Weak diversification

The 3 months correlation between Vats and Chongqing is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Chongqing Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Road Bridge and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Chongqing Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Road Bridge has no effect on the direction of Vats Liquor i.e., Vats Liquor and Chongqing Road go up and down completely randomly.

Pair Corralation between Vats Liquor and Chongqing Road

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Chongqing Road. In addition to that, Vats Liquor is 1.02 times more volatile than Chongqing Road Bridge. It trades about -0.04 of its total potential returns per unit of risk. Chongqing Road Bridge is currently generating about 0.02 per unit of volatility. If you would invest  559.00  in Chongqing Road Bridge on October 5, 2024 and sell it today you would lose (9.00) from holding Chongqing Road Bridge or give up 1.61% of portfolio value over 90 days.

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

Vats Liquor Chain  vs.  Chongqing Road Bridge

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain 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.

Chongqing Road Bridge

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Road Bridge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Road is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vats Liquor and Chongqing Road

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

The idea behind Vats Liquor Chain and Chongqing Road Bridge 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.