Correlation Between Retail Estates and Tsingtao Brewery

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

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

Diversification Opportunities for Retail Estates and Tsingtao Brewery

0.43

Correlation Coefficient

Retail Estates  Tsingtao Brewery

Very weak diversification

The 3 months correlation between Retail and Tsingtao is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Retail Estates and Tsingtao Brewery

Assuming the 90 days horizon Retail Estates NV is expected to generate 0.62 times more return on investment than Tsingtao Brewery. However, Retail Estates NV is 1.62 times less risky than Tsingtao Brewery. It trades about 0.06 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.01 per unit of risk. If you would invest  5,780  in Retail Estates NV on December 21, 2024 and sell it today you would earn a total of  200.00  from holding Retail Estates NV or generate 3.46% return on investment over 90 days.

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

Retail Estates NV  vs.  Tsingtao Brewery

Retail Estates NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Estates NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Retail Estates is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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

Pair Trading with Retail Estates and Tsingtao Brewery

The main advantage of trading using opposite Retail Estates and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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 Retail Estates NV 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 Transaction History module to view history of all your transactions and understand their impact on performance.