Correlation Between Kweichow Moutai and Tianjin Pengling

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

Diversification Opportunities for Kweichow Moutai and Tianjin Pengling

0.2

Correlation Coefficient

Kweichow Moutai  Tianjin Pengling

Modest diversification

The 3 months correlation between Kweichow and Tianjin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Tianjin Pengling Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Pengling Rubber 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 Tianjin Pengling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Pengling Rubber has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Tianjin Pengling go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Tianjin Pengling

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.5 times more return on investment than Tianjin Pengling. However, Kweichow Moutai Co is 1.98 times less risky than Tianjin Pengling. It trades about -0.11 of its potential returns per unit of risk. Tianjin Pengling Rubber is currently generating about -0.41 per unit of risk. If you would invest  151,880  in Kweichow Moutai Co on October 8, 2024 and sell it today you would lose (4,380) from holding Kweichow Moutai Co or give up 2.88% of portfolio value over 90 days.

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

Kweichow Moutai Co  vs.  Tianjin Pengling Rubber

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tianjin Pengling Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Pengling Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kweichow Moutai and Tianjin Pengling

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

The idea behind Kweichow Moutai Co and Tianjin Pengling Rubber 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.