Correlation Between Dr Peng and Kweichow Moutai

Can any of the company-specific risk be diversified away by investing in both Dr Peng and Kweichow Moutai 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 Dr Peng and Kweichow Moutai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dr Peng Telecom and Kweichow Moutai Co, you can compare the effects of market volatilities on Dr Peng and Kweichow Moutai 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 Dr Peng with a short position of Kweichow Moutai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Kweichow Moutai.

Diversification Opportunities for Dr Peng and Kweichow Moutai

-0.19

Correlation Coefficient

Dr Peng  Kweichow Moutai

Good diversification

The 3 months correlation between 600804 and Kweichow is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Dr Peng i.e., Dr Peng and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Dr Peng and Kweichow Moutai

Assuming the 90 days trading horizon Dr Peng Telecom is expected to generate 3.2 times more return on investment than Kweichow Moutai. However, Dr Peng is 3.2 times more volatile than Kweichow Moutai Co. It trades about 0.18 of its potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.05 per unit of risk. If you would invest  135.00  in Dr Peng Telecom on October 21, 2024 and sell it today you would earn a total of  73.00  from holding Dr Peng Telecom or generate 54.07% return on investment over 90 days.

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

Dr Peng Telecom  vs.  Kweichow Moutai Co

Dr Peng Telecom

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Dr Peng and Kweichow Moutai

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

The idea behind Dr Peng Telecom and Kweichow Moutai 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.