Correlation Between Kweichow Moutai and CNPC Capital

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Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and CNPC Capital 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 Kweichow Moutai and CNPC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kweichow Moutai Co and CNPC Capital Co, you can compare the effects of market volatilities on Kweichow Moutai and CNPC Capital 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 Kweichow Moutai with a short position of CNPC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and CNPC Capital.

Diversification Opportunities for Kweichow Moutai and CNPC Capital

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Kweichow and CNPC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and CNPC Capital go up and down completely randomly.

Pair Corralation between Kweichow Moutai and CNPC Capital

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 4.67 times less return on investment than CNPC Capital. But when comparing it to its historical volatility, Kweichow Moutai Co is 1.74 times less risky than CNPC Capital. It trades about 0.06 of its potential returns per unit of risk. CNPC Capital Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  506.00  in CNPC Capital Co on September 5, 2024 and sell it today you would earn a total of  250.00  from holding CNPC Capital Co or generate 49.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Kweichow Moutai Co  vs.  CNPC Capital Co

 Performance 
       Timeline  
Kweichow Moutai 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai may actually be approaching a critical reversion point that can send shares even higher in January 2025.
CNPC Capital 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CNPC Capital Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNPC Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Kweichow Moutai and CNPC Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kweichow Moutai and CNPC Capital

The main advantage of trading using opposite Kweichow Moutai and CNPC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kweichow Moutai position performs unexpectedly, CNPC Capital 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 CNPC Capital will offset losses from the drop in CNPC Capital's long position.
The idea behind Kweichow Moutai Co and CNPC Capital 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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