Correlation Between Kweichow Moutai and Ping An

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

Diversification Opportunities for Kweichow Moutai and Ping An

0.88

Correlation Coefficient

Kweichow Moutai  Ping An

Very poor diversification

The 3 months correlation between Kweichow and Ping is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Ping An go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Ping An

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Ping An. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 1.15 times less risky than Ping An. The stock trades about -0.06 of its potential returns per unit of risk. The Ping An Insurance is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,325  in Ping An Insurance on November 29, 2024 and sell it today you would lose (163.00) from holding Ping An Insurance or give up 3.06% of portfolio value over 90 days.

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

Kweichow Moutai Co  vs.  Ping An Insurance

Kweichow Moutai

Risk-Adjusted Performance

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 somewhat strong basic indicators, Kweichow Moutai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ping An Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ping An 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 Ping An

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

The idea behind Kweichow Moutai Co and Ping An Insurance 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .