Correlation Between Jiangsu Expressway and Tsingtao Brewery

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

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

Diversification Opportunities for Jiangsu Expressway and Tsingtao Brewery

0.45

Correlation Coefficient

Jiangsu Expressway  Tsingtao Brewery

Very weak diversification

The 3 months correlation between Jiangsu and Tsingtao is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Expressway Co and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Jiangsu Expressway 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 Jiangsu Expressway Co 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 Jiangsu Expressway i.e., Jiangsu Expressway and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Jiangsu Expressway and Tsingtao Brewery

Assuming the 90 days horizon Jiangsu Expressway Co is expected to under-perform the Tsingtao Brewery. But the pink sheet apears to be less risky and, when comparing its historical volatility, Jiangsu Expressway Co is 1.49 times less risky than Tsingtao Brewery. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Tsingtao Brewery Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,210  in Tsingtao Brewery Co on September 22, 2024 and sell it today you would earn a total of  198.00  from holding Tsingtao Brewery Co or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Jiangsu Expressway Co  vs.  Tsingtao Brewery Co

Jiangsu Expressway

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Jiangsu Expressway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tsingtao Brewery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tsingtao Brewery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangsu Expressway and Tsingtao Brewery

The main advantage of trading using opposite Jiangsu Expressway and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jiangsu Expressway 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 Jiangsu Expressway Co and Tsingtao Brewery Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.