Correlation Between Kweichow Moutai and Harbin Hatou

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

Diversification Opportunities for Kweichow Moutai and Harbin Hatou

0.67

Correlation Coefficient

Kweichow Moutai  Harbin Hatou

Poor diversification

The 3 months correlation between Kweichow and Harbin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Harbin Hatou Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbin Hatou Investment 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 Harbin Hatou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbin Hatou Investment has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Harbin Hatou go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Harbin Hatou

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 11.39 times less return on investment than Harbin Hatou. But when comparing it to its historical volatility, Kweichow Moutai Co is 3.06 times less risky than Harbin Hatou. It trades about 0.04 of its potential returns per unit of risk. Harbin Hatou Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  649.00  in Harbin Hatou Investment on September 23, 2024 and sell it today you would earn a total of  75.00  from holding Harbin Hatou Investment or generate 11.56% 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.  Harbin Hatou Investment

Kweichow Moutai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 10 (%) 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.

Harbin Hatou Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harbin Hatou Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harbin Hatou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Harbin Hatou

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

The idea behind Kweichow Moutai Co and Harbin Hatou Investment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.