Correlation Between NVIDIA and Tsingtao Brewery

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

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

Diversification Opportunities for NVIDIA and Tsingtao Brewery

-0.49

Correlation Coefficient

NVIDIA  Tsingtao Brewery

Very good diversification

The 3 months correlation between NVIDIA and Tsingtao is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between NVIDIA and Tsingtao Brewery

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, NVIDIA is 1.72 times less risky than Tsingtao Brewery. The stock trades about -0.02 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  626.00  in Tsingtao Brewery on October 4, 2024 and sell it today you would earn a total of  55.00  from holding Tsingtao Brewery or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

NVIDIA  vs.  Tsingtao Brewery

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and Tsingtao Brewery

The main advantage of trading using opposite NVIDIA and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.