Correlation Between GM and Tsingtao Brewery

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

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

Diversification Opportunities for GM and Tsingtao Brewery

0.33

Correlation Coefficient

GM  Tsingtao Brewery

Weak diversification

The 3 months correlation between GM and Tsingtao is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and GM 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 General Motors 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 GM i.e., GM and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between GM and Tsingtao Brewery

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Tsingtao Brewery. In addition to that, GM is 1.43 times more volatile than Tsingtao Brewery. It trades about -0.06 of its total potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.0 per unit of volatility. If you would invest  675.00  in Tsingtao Brewery on December 28, 2024 and sell it today you would lose (10.00) from holding Tsingtao Brewery or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

General Motors  vs.  Tsingtao Brewery

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 GM and Tsingtao Brewery

The main advantage of trading using opposite GM and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Commodity Directory module to find actively traded commodities issued by global exchanges.