Correlation Between Molson Coors and Tsingtao Brewery

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

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

Diversification Opportunities for Molson Coors and Tsingtao Brewery

-0.34

Correlation Coefficient

Molson Coors  Tsingtao Brewery

Very good diversification

The 3 months correlation between Molson and Tsingtao is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Molson Coors 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 Molson Coors Brewing 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 Molson Coors i.e., Molson Coors and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Molson Coors and Tsingtao Brewery

Considering the 90-day investment horizon Molson Coors Brewing is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, Molson Coors Brewing is 5.83 times less risky than Tsingtao Brewery. The stock trades about -0.06 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  652.00  in Tsingtao Brewery on September 22, 2024 and sell it today you would lose (14.00) from holding Tsingtao Brewery or give up 2.15% of portfolio value over 90 days.

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

Molson Coors Brewing  vs.  Tsingtao Brewery

Molson Coors Brewing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tsingtao Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tsingtao Brewery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molson Coors and Tsingtao Brewery

The main advantage of trading using opposite Molson Coors and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Brewing 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.