Correlation Between Tibet Huayu and Kweichow Moutai

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

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

Diversification Opportunities for Tibet Huayu and Kweichow Moutai

0.35

Correlation Coefficient

Tibet Huayu  Kweichow Moutai

Weak diversification

The 3 months correlation between Tibet and Kweichow is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Tibet Huayu 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 Tibet Huayu Mining 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 Tibet Huayu i.e., Tibet Huayu and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Tibet Huayu and Kweichow Moutai

Assuming the 90 days trading horizon Tibet Huayu is expected to generate 1.05 times less return on investment than Kweichow Moutai. In addition to that, Tibet Huayu is 1.78 times more volatile than Kweichow Moutai Co. It trades about 0.02 of its total potential returns per unit of risk. Kweichow Moutai Co is currently generating about 0.03 per unit of volatility. If you would invest  144,038  in Kweichow Moutai Co on September 29, 2024 and sell it today you would earn a total of  8,859  from holding Kweichow Moutai Co or generate 6.15% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Kweichow Moutai Co

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tibet Huayu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tibet Huayu and Kweichow Moutai

The main advantage of trading using opposite Tibet Huayu and Kweichow Moutai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tibet Huayu 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 Tibet Huayu Mining 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.