Correlation Between Kweichow Moutai and Hua Xia

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

Diversification Opportunities for Kweichow Moutai and Hua Xia

-0.38

Correlation Coefficient

Kweichow Moutai  Hua Xia

Very good diversification

The 3 months correlation between Kweichow and Hua is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Hua Xia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Xia Bank 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 Hua Xia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Xia Bank has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Hua Xia go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Hua Xia

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Hua Xia. In addition to that, Kweichow Moutai is 1.12 times more volatile than Hua Xia Bank. It trades about -0.03 of its total potential returns per unit of risk. Hua Xia Bank is currently generating about 0.07 per unit of volatility. If you would invest  489.00  in Hua Xia Bank on October 13, 2024 and sell it today you would earn a total of  259.00  from holding Hua Xia Bank or generate 52.97% 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.  Hua Xia Bank

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hua Xia Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Xia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hua Xia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kweichow Moutai and Hua Xia

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

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