Correlation Between Consolidated Communications and Tsingtao Brewery

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

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

Diversification Opportunities for Consolidated Communications and Tsingtao Brewery

-0.27

Correlation Coefficient

Consolidated Communications  Tsingtao Brewery

Very good diversification

The 3 months correlation between Consolidated and Tsingtao is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Consolidated Communications and Tsingtao Brewery

Assuming the 90 days horizon Consolidated Communications is expected to generate 1.22 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, Consolidated Communications Holdings is 3.13 times less risky than Tsingtao Brewery. It trades about 0.28 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  610.00  in Tsingtao Brewery on October 6, 2024 and sell it today you would earn a total of  54.00  from holding Tsingtao Brewery or generate 8.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

Consolidated Communications Ho  vs.  Tsingtao Brewery

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Consolidated Communications and Tsingtao Brewery

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

The idea behind Consolidated Communications Holdings and Tsingtao Brewery 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.