Correlation Between Panda Financial and Chongqing Brewery

Can any of the company-specific risk be diversified away by investing in both Panda Financial and Chongqing Brewery 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 Panda Financial and Chongqing Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Panda Financial Holding and Chongqing Brewery Co, you can compare the effects of market volatilities on Panda Financial and Chongqing Brewery 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 Panda Financial with a short position of Chongqing Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panda Financial and Chongqing Brewery.

Diversification Opportunities for Panda Financial and Chongqing Brewery

0.68

Correlation Coefficient

Panda Financial  Chongqing Brewery

Poor diversification

The 3 months correlation between Panda and Chongqing is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and Chongqing Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Brewery and Panda Financial 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 Panda Financial Holding are associated (or correlated) with Chongqing Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Brewery has no effect on the direction of Panda Financial i.e., Panda Financial and Chongqing Brewery go up and down completely randomly.

Pair Corralation between Panda Financial and Chongqing Brewery

Assuming the 90 days trading horizon Panda Financial Holding is expected to generate 1.82 times more return on investment than Chongqing Brewery. However, Panda Financial is 1.82 times more volatile than Chongqing Brewery Co. It trades about 0.01 of its potential returns per unit of risk. Chongqing Brewery Co is currently generating about -0.08 per unit of risk. If you would invest  1,194  in Panda Financial Holding on October 26, 2024 and sell it today you would lose (28.00) from holding Panda Financial Holding or give up 2.35% of portfolio value over 90 days.

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

Panda Financial Holding  vs.  Chongqing Brewery Co

Panda Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Panda Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Panda Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chongqing Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Brewery Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Panda Financial and Chongqing Brewery

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

The idea behind Panda Financial Holding and Chongqing Brewery Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.