Correlation Between Kweichow Moutai and Zhongtong Guomai

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

Diversification Opportunities for Kweichow Moutai and Zhongtong Guomai

0.31

Correlation Coefficient

Kweichow Moutai  Zhongtong Guomai

Weak diversification

The 3 months correlation between Kweichow and Zhongtong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com 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 Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Zhongtong Guomai

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Zhongtong Guomai. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 1.85 times less risky than Zhongtong Guomai. The stock trades about -0.03 of its potential returns per unit of risk. The Zhongtong Guomai Communication is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Zhongtong Guomai Communication on September 24, 2024 and sell it today you would earn a total of  819.00  from holding Zhongtong Guomai Communication or generate 215.53% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Zhongtong Guomai Communication

Kweichow Moutai

Risk-Adjusted Performance

6 of 100

OK

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongtong Guomai Com

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Zhongtong Guomai

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

The idea behind Kweichow Moutai Co and Zhongtong Guomai Communication 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.