Correlation Between Kweichow Moutai and Shanghai

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

Diversification Opportunities for Kweichow Moutai and Shanghai

0.63

Correlation Coefficient

Kweichow Moutai  Shanghai

Poor diversification

The 3 months correlation between Kweichow and Shanghai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Shanghai SK Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai SK Automation 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 Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai SK Automation has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Shanghai go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Shanghai

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 2.39 times less risky than Shanghai. The stock trades about -0.07 of its potential returns per unit of risk. The Shanghai SK Automation is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,812  in Shanghai SK Automation on October 22, 2024 and sell it today you would lose (27.00) from holding Shanghai SK Automation or give up 0.71% 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.  Shanghai SK Automation

Kweichow Moutai

Risk-Adjusted Performance

0 of 100

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.

Shanghai SK Automation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kweichow Moutai Co and Shanghai SK Automation 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.