Correlation Between Tsingtao Brewery and Anheuser Busch

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

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

Diversification Opportunities for Tsingtao Brewery and Anheuser Busch

0.6

Correlation Coefficient

Tsingtao Brewery  Anheuser Busch

Poor diversification

The 3 months correlation between Tsingtao and Anheuser is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev and Tsingtao Brewery 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 Tsingtao Brewery are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Anheuser Busch go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Anheuser Busch

Assuming the 90 days horizon Tsingtao Brewery is expected to generate 4.35 times more return on investment than Anheuser Busch. However, Tsingtao Brewery is 4.35 times more volatile than Anheuser Busch Inbev. It trades about 0.02 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.02 per unit of risk. If you would invest  881.00  in Tsingtao Brewery on October 5, 2024 and sell it today you would lose (195.00) from holding Tsingtao Brewery or give up 22.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.92%
Values	Daily Returns

Tsingtao Brewery  vs.  Anheuser Busch Inbev

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.

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Pair Trading with Tsingtao Brewery and Anheuser Busch

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

The idea behind Tsingtao Brewery and Anheuser Busch Inbev 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.