Correlation Between CIMC Vehicles and Tsingtao Brewery

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

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

Diversification Opportunities for CIMC Vehicles and Tsingtao Brewery

0.9

Correlation Coefficient

CIMC Vehicles  Tsingtao Brewery

Almost no diversification

The 3 months correlation between CIMC and Tsingtao is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CIMC Vehicles Co and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and CIMC Vehicles 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 CIMC Vehicles Co 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 CIMC Vehicles i.e., CIMC Vehicles and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between CIMC Vehicles and Tsingtao Brewery

Assuming the 90 days trading horizon CIMC Vehicles is expected to generate 2.4 times less return on investment than Tsingtao Brewery. In addition to that, CIMC Vehicles is 1.03 times more volatile than Tsingtao Brewery Co. It trades about 0.09 of its total potential returns per unit of risk. Tsingtao Brewery Co is currently generating about 0.21 per unit of volatility. If you would invest  5,446  in Tsingtao Brewery Co on September 15, 2024 and sell it today you would earn a total of  2,454  from holding Tsingtao Brewery Co or generate 45.06% return on investment over 90 days.

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

CIMC Vehicles Co  vs.  Tsingtao Brewery Co

CIMC Vehicles

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CIMC Vehicles Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CIMC Vehicles sustained solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Brewery

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsingtao Brewery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIMC Vehicles and Tsingtao Brewery

The main advantage of trading using opposite CIMC Vehicles and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIMC Vehicles 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 CIMC Vehicles Co 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.