Correlation Between Kweichow Moutai and Der International

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

Diversification Opportunities for Kweichow Moutai and Der International

0.5

Correlation Coefficient

Kweichow Moutai  Der International

Very weak diversification

The 3 months correlation between Kweichow and Der is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Der International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Der International Home 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 Der International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Der International Home has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Der International go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Der International

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 13.59 times less return on investment than Der International. But when comparing it to its historical volatility, Kweichow Moutai Co is 3.33 times less risky than Der International. It trades about 0.04 of its potential returns per unit of risk. Der International Home is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Der International Home on September 23, 2024 and sell it today you would earn a total of  68.00  from holding Der International Home or generate 13.96% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Der International Home

Kweichow Moutai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai sustained solid returns over the last few months and may actually be approaching a breakup point.

Der International Home

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Der International Home are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Der International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Der International

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

The idea behind Kweichow Moutai Co and Der International Home 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.