Correlation Between Tsingtao Brewery and Howden Joinery

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

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

Diversification Opportunities for Tsingtao Brewery and Howden Joinery

-0.23

Correlation Coefficient

Tsingtao Brewery  Howden Joinery

Very good diversification

The 3 months correlation between Tsingtao and Howden is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Howden Joinery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howden Joinery Group 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 Howden Joinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howden Joinery Group has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Howden Joinery go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Howden Joinery

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.84 times more return on investment than Howden Joinery. However, Tsingtao Brewery is 1.84 times more volatile than Howden Joinery Group. It trades about 0.23 of its potential returns per unit of risk. Howden Joinery Group is currently generating about 0.09 per unit of risk. If you would invest  600.00  in Tsingtao Brewery on September 16, 2024 and sell it today you would earn a total of  64.00  from holding Tsingtao Brewery or generate 10.67% return on investment over 90 days.

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

Tsingtao Brewery  vs.  Howden Joinery Group

Tsingtao Brewery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Howden Joinery Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Howden Joinery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Tsingtao Brewery and Howden Joinery

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

The idea behind Tsingtao Brewery and Howden Joinery Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.