Correlation Between Kweichow Moutai and Guangzhou Ruoyuchen

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

Diversification Opportunities for Kweichow Moutai and Guangzhou Ruoyuchen

-0.4

Correlation Coefficient

Kweichow Moutai  Guangzhou Ruoyuchen

Very good diversification

The 3 months correlation between Kweichow and Guangzhou is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Guangzhou Ruoyuchen Informatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Ruoyuchen 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 Guangzhou Ruoyuchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Ruoyuchen has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Guangzhou Ruoyuchen go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Guangzhou Ruoyuchen

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Guangzhou Ruoyuchen. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 3.78 times less risky than Guangzhou Ruoyuchen. The stock trades about -0.02 of its potential returns per unit of risk. The Guangzhou Ruoyuchen Information is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,332  in Guangzhou Ruoyuchen Information on December 2, 2024 and sell it today you would earn a total of  697.00  from holding Guangzhou Ruoyuchen Information or generate 29.89% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Guangzhou Ruoyuchen Informatio

Kweichow Moutai

Risk-Adjusted Performance

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.

Guangzhou Ruoyuchen

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Ruoyuchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Guangzhou Ruoyuchen

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

The idea behind Kweichow Moutai Co and Guangzhou Ruoyuchen Information 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.