Correlation Between Carlsberg and Tsingtao Brewery

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

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

Diversification Opportunities for Carlsberg and Tsingtao Brewery

0.41

Correlation Coefficient

Carlsberg  Tsingtao Brewery

Very weak diversification

The 3 months correlation between Carlsberg and Tsingtao is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Carlsberg 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 Carlsberg AS 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 Carlsberg i.e., Carlsberg and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Carlsberg and Tsingtao Brewery

Assuming the 90 days horizon Carlsberg AS is expected to under-perform the Tsingtao Brewery. But the pink sheet apears to be less risky and, when comparing its historical volatility, Carlsberg AS is 2.95 times less risky than Tsingtao Brewery. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  652.00  in Tsingtao Brewery on September 22, 2024 and sell it today you would lose (14.00) from holding Tsingtao Brewery or give up 2.15% of portfolio value over 90 days.

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

Carlsberg AS  vs.  Tsingtao Brewery

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

Tsingtao Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tsingtao Brewery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlsberg and Tsingtao Brewery

The main advantage of trading using opposite Carlsberg and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlsberg 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 Carlsberg AS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.