Correlation Between Tsingtao Brewery and Xiangpiaopiao Food

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

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

Diversification Opportunities for Tsingtao Brewery and Xiangpiaopiao Food

0.76

Correlation Coefficient

Tsingtao Brewery  Xiangpiaopiao Food

Poor diversification

The 3 months correlation between Tsingtao and Xiangpiaopiao is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery Co and Xiangpiaopiao Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangpiaopiao Food and Tsingtao Brewery 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 Tsingtao Brewery Co are associated (or correlated) with Xiangpiaopiao Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangpiaopiao Food has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Xiangpiaopiao Food go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Xiangpiaopiao Food

Assuming the 90 days trading horizon Tsingtao Brewery Co is expected to generate 0.32 times more return on investment than Xiangpiaopiao Food. However, Tsingtao Brewery Co is 3.12 times less risky than Xiangpiaopiao Food. It trades about -0.29 of its potential returns per unit of risk. Xiangpiaopiao Food Co is currently generating about -0.15 per unit of risk. If you would invest  7,823  in Tsingtao Brewery Co on October 26, 2024 and sell it today you would lose (838.00) from holding Tsingtao Brewery Co or give up 10.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Tsingtao Brewery Co  vs.  Xiangpiaopiao Food Co

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xiangpiaopiao Food

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangpiaopiao Food Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangpiaopiao Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Xiangpiaopiao Food

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

The idea behind Tsingtao Brewery Co and Xiangpiaopiao Food 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.