Correlation Between DISTRICT METALS and Tsingtao Brewery

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

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

Diversification Opportunities for DISTRICT METALS and Tsingtao Brewery

-0.03

Correlation Coefficient

DISTRICT METALS  Tsingtao Brewery

Good diversification

The 3 months correlation between DISTRICT and Tsingtao is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding DISTRICT METALS and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and DISTRICT METALS 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 DISTRICT METALS 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 DISTRICT METALS i.e., DISTRICT METALS and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between DISTRICT METALS and Tsingtao Brewery

Assuming the 90 days trading horizon DISTRICT METALS is expected to under-perform the Tsingtao Brewery. In addition to that, DISTRICT METALS is 1.99 times more volatile than Tsingtao Brewery. It trades about -0.05 of its total potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.03 per unit of volatility. If you would invest  675.00  in Tsingtao Brewery on December 30, 2024 and sell it today you would lose (28.00) from holding Tsingtao Brewery or give up 4.15% of portfolio value over 90 days.

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

DISTRICT METALS  vs.  Tsingtao Brewery

DISTRICT METALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days DISTRICT METALS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

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 rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DISTRICT METALS and Tsingtao Brewery

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