Correlation Between Hengerda New and Kweichow Moutai

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

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

Diversification Opportunities for Hengerda New and Kweichow Moutai

0.27

Correlation Coefficient

Hengerda New  Kweichow Moutai

Modest diversification

The 3 months correlation between Hengerda and Kweichow is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Hengerda New 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 Hengerda New Materials 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 Hengerda New i.e., Hengerda New and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Hengerda New and Kweichow Moutai

Assuming the 90 days trading horizon Hengerda New Materials is expected to under-perform the Kweichow Moutai. In addition to that, Hengerda New is 1.81 times more volatile than Kweichow Moutai Co. It trades about -0.1 of its total potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.14 per unit of volatility. If you would invest  172,300  in Kweichow Moutai Co on October 5, 2024 and sell it today you would lose (24,800) from holding Kweichow Moutai Co or give up 14.39% of portfolio value over 90 days.

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

Hengerda New Materials  vs.  Kweichow Moutai Co

Hengerda New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengerda New Materials 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.

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 Hengerda New and Kweichow Moutai

The main advantage of trading using opposite Hengerda New and Kweichow Moutai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengerda New 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 Hengerda New Materials 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.