Correlation Between China Asset and Kweichow Moutai

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

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

Diversification Opportunities for China Asset and Kweichow Moutai

-0.72

Correlation Coefficient

China Asset  Kweichow Moutai

Pay attention - limited upside

The 3 months correlation between China and Kweichow is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and China Asset 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 China Asset Management 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 China Asset i.e., China Asset and Kweichow Moutai go up and down completely randomly.

Pair Corralation between China Asset and Kweichow Moutai

Assuming the 90 days trading horizon China Asset Management is expected to generate 0.8 times more return on investment than Kweichow Moutai. However, China Asset Management is 1.25 times less risky than Kweichow Moutai. It trades about 0.29 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.05 per unit of risk. If you would invest  314.00  in China Asset Management on October 21, 2024 and sell it today you would earn a total of  66.00  from holding China Asset Management or generate 21.02% return on investment over 90 days.

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

China Asset Management  vs.  Kweichow Moutai Co

China Asset Management

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Kweichow Moutai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Asset and Kweichow Moutai

The main advantage of trading using opposite China Asset and Kweichow Moutai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Asset 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 China Asset Management 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.