Correlation Between Kweichow Moutai and TianJin 712

Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and TianJin 712 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 TianJin 712 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 TianJin 712 Communication, you can compare the effects of market volatilities on Kweichow Moutai and TianJin 712 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 TianJin 712. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and TianJin 712.

Diversification Opportunities for Kweichow Moutai and TianJin 712

0.69

Correlation Coefficient

Kweichow Moutai  TianJin 712

Poor diversification

The 3 months correlation between Kweichow and TianJin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and TianJin 712 Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TianJin 712 Communication 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 TianJin 712. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TianJin 712 Communication has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and TianJin 712 go up and down completely randomly.

Pair Corralation between Kweichow Moutai and TianJin 712

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.58 times more return on investment than TianJin 712. However, Kweichow Moutai Co is 1.73 times less risky than TianJin 712. It trades about 0.0 of its potential returns per unit of risk. TianJin 712 Communication is currently generating about -0.03 per unit of risk. If you would invest  170,089  in Kweichow Moutai Co on September 20, 2024 and sell it today you would lose (12,939) from holding Kweichow Moutai Co or give up 7.61% of portfolio value over 90 days.

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

Kweichow Moutai Co  vs.  TianJin 712 Communication

Kweichow Moutai

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 11 (%) 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.

TianJin 712 Communication

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TianJin 712 Communication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TianJin 712 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and TianJin 712

The main advantage of trading using opposite Kweichow Moutai and TianJin 712 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kweichow Moutai position performs unexpectedly, TianJin 712 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 TianJin 712 will offset losses from the drop in TianJin 712's long position.

The idea behind Kweichow Moutai Co and TianJin 712 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.