Correlation Between SAN MIGUEL and Chongqing Machinery

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

By analyzing existing cross correlation between SAN MIGUEL BREWERY and Chongqing Machinery Electric, you can compare the effects of market volatilities on SAN MIGUEL and Chongqing Machinery 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 SAN MIGUEL with a short position of Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAN MIGUEL and Chongqing Machinery.

Diversification Opportunities for SAN MIGUEL and Chongqing Machinery

-0.35

Correlation Coefficient

SAN MIGUEL  Chongqing Machinery

Very good diversification

The 3 months correlation between SAN and Chongqing is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery and SAN MIGUEL 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 SAN MIGUEL BREWERY are associated (or correlated) with Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of SAN MIGUEL i.e., SAN MIGUEL and Chongqing Machinery go up and down completely randomly.

Pair Corralation between SAN MIGUEL and Chongqing Machinery

Assuming the 90 days trading horizon SAN MIGUEL is expected to generate 1.28 times less return on investment than Chongqing Machinery. In addition to that, SAN MIGUEL is 1.08 times more volatile than Chongqing Machinery Electric. It trades about 0.05 of its total potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.06 per unit of volatility. If you would invest  2.44  in Chongqing Machinery Electric on October 11, 2024 and sell it today you would earn a total of  5.46  from holding Chongqing Machinery Electric or generate 223.77% return on investment over 90 days.

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

SAN MIGUEL BREWERY  vs.  Chongqing Machinery Electric

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chongqing Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chongqing Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SAN MIGUEL and Chongqing Machinery

The main advantage of trading using opposite SAN MIGUEL and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.

The idea behind SAN MIGUEL BREWERY and Chongqing Machinery Electric 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.