Correlation Between Kweichow Moutai and Shandong Mining

Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and Shandong Mining 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 Shandong Mining 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 Shandong Mining Machinery, you can compare the effects of market volatilities on Kweichow Moutai and Shandong Mining 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 Shandong Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and Shandong Mining.

Diversification Opportunities for Kweichow Moutai and Shandong Mining

-0.27

Correlation Coefficient

Kweichow Moutai  Shandong Mining

Very good diversification

The 3 months correlation between Kweichow and Shandong is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Shandong Mining Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Mining Machinery 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 Shandong Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Mining Machinery has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Shandong Mining go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Shandong Mining

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Shandong Mining. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 4.16 times less risky than Shandong Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Shandong Mining Machinery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  257.00  in Shandong Mining Machinery on October 23, 2024 and sell it today you would earn a total of  131.00  from holding Shandong Mining Machinery or generate 50.97% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Shandong Mining Machinery

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.

Shandong Mining Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Shandong Mining

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

The idea behind Kweichow Moutai Co and Shandong Mining Machinery 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..