Correlation Between Strategic Investments and Tsingtao Brewery

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

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

Diversification Opportunities for Strategic Investments and Tsingtao Brewery

-0.25

Correlation Coefficient

Strategic Investments  Tsingtao Brewery

Very good diversification

The 3 months correlation between Strategic and Tsingtao is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Strategic Investments 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 Strategic Investments 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 Strategic Investments i.e., Strategic Investments and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Strategic Investments and Tsingtao Brewery

Assuming the 90 days horizon Strategic Investments AS is expected to generate 4.31 times more return on investment than Tsingtao Brewery. However, Strategic Investments is 4.31 times more volatile than Tsingtao Brewery. It trades about 0.01 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.03 per unit of risk. If you would invest  14.00  in Strategic Investments AS on December 30, 2024 and sell it today you would lose (2.00) from holding Strategic Investments AS or give up 14.29% of portfolio value over 90 days.

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

Strategic Investments AS  vs.  Tsingtao Brewery

Strategic Investments

Risk-Adjusted Performance

Weak

Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Strategic Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the 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 Strategic Investments and Tsingtao Brewery

The main advantage of trading using opposite Strategic Investments and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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 Strategic Investments 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.