Correlation Between Kweichow Moutai and Ningbo Fangzheng

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

Diversification Opportunities for Kweichow Moutai and Ningbo Fangzheng

0.8

Correlation Coefficient

Kweichow Moutai  Ningbo Fangzheng

Very poor diversification

The 3 months correlation between Kweichow and Ningbo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Ningbo Fangzheng Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fangzheng Aut 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 Ningbo Fangzheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fangzheng Aut has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Ningbo Fangzheng go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Ningbo Fangzheng

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 1.84 times less return on investment than Ningbo Fangzheng. But when comparing it to its historical volatility, Kweichow Moutai Co is 1.64 times less risky than Ningbo Fangzheng. It trades about 0.15 of its potential returns per unit of risk. Ningbo Fangzheng Automobile is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,240  in Ningbo Fangzheng Automobile on September 14, 2024 and sell it today you would earn a total of  557.00  from holding Ningbo Fangzheng Automobile or generate 44.92% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Ningbo Fangzheng Automobile

Kweichow Moutai

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 11 (%) 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.

Ningbo Fangzheng Aut

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Kweichow Moutai and Ningbo Fangzheng

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

The idea behind Kweichow Moutai Co and Ningbo Fangzheng Automobile 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.