Correlation Between Chongqing Brewery and Hengerda New

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

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

Diversification Opportunities for Chongqing Brewery and Hengerda New

0.71

Correlation Coefficient

Chongqing Brewery  Hengerda New

Poor diversification

The 3 months correlation between Chongqing and Hengerda is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Brewery Co and Hengerda New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengerda New Materials and Chongqing Brewery 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 Chongqing Brewery Co are associated (or correlated) with Hengerda New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengerda New Materials has no effect on the direction of Chongqing Brewery i.e., Chongqing Brewery and Hengerda New go up and down completely randomly.

Pair Corralation between Chongqing Brewery and Hengerda New

Assuming the 90 days trading horizon Chongqing Brewery Co is expected to under-perform the Hengerda New. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Brewery Co is 1.3 times less risky than Hengerda New. The stock trades about -0.07 of its potential returns per unit of risk. The Hengerda New Materials is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,695  in Hengerda New Materials on October 14, 2024 and sell it today you would lose (186.00) from holding Hengerda New Materials or give up 6.9% of portfolio value over 90 days.

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

Chongqing Brewery Co  vs.  Hengerda New Materials

Chongqing Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Brewery 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.

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

Pair Trading with Chongqing Brewery and Hengerda New

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

The idea behind Chongqing Brewery Co and Hengerda New Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.