Correlation Between Alliance Data and Tsingtao Brewery

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

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

Diversification Opportunities for Alliance Data and Tsingtao Brewery

-0.27

Correlation Coefficient

Alliance Data  Tsingtao Brewery

Very good diversification

The 3 months correlation between Alliance and Tsingtao is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Alliance Data and Tsingtao Brewery

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, Alliance Data Systems is 1.01 times less risky than Tsingtao Brewery. The stock trades about -0.31 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  629.00  in Tsingtao Brewery on October 12, 2024 and sell it today you would earn a total of  18.00  from holding Tsingtao Brewery or generate 2.86% return on investment over 90 days.

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

Alliance Data Systems  vs.  Tsingtao Brewery

Alliance Data Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Data Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Alliance Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alliance Data and Tsingtao Brewery

The main advantage of trading using opposite Alliance Data and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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 Alliance Data Systems 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.