Correlation Between Kweichow Moutai and China Enterprise

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

Diversification Opportunities for Kweichow Moutai and China Enterprise

0.75

Correlation Coefficient

Kweichow Moutai  China Enterprise

Poor diversification

The 3 months correlation between Kweichow and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and China Enterprise go up and down completely randomly.

Pair Corralation between Kweichow Moutai and China Enterprise

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.37 times more return on investment than China Enterprise. However, Kweichow Moutai Co is 2.67 times less risky than China Enterprise. It trades about 0.08 of its potential returns per unit of risk. China Enterprise Co is currently generating about -0.02 per unit of risk. If you would invest  149,857  in Kweichow Moutai Co on September 25, 2024 and sell it today you would earn a total of  2,788  from holding Kweichow Moutai Co or generate 1.86% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  China Enterprise Co

Kweichow Moutai

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Enterprise

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Enterprise Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Enterprise may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kweichow Moutai and China Enterprise

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

The idea behind Kweichow Moutai Co and China Enterprise Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.