Correlation Between Tsingtao Brewery and USWE SPORTS

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

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

Diversification Opportunities for Tsingtao Brewery and USWE SPORTS

-0.49

Correlation Coefficient

Tsingtao Brewery  USWE SPORTS

Very good diversification

The 3 months correlation between Tsingtao and USWE is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB 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 USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and USWE SPORTS go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and USWE SPORTS

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.09 times more return on investment than USWE SPORTS. However, Tsingtao Brewery is 1.09 times more volatile than USWE SPORTS AB. It trades about 0.11 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about 0.08 per unit of risk. If you would invest  610.00  in Tsingtao Brewery on October 6, 2024 and sell it today you would earn a total of  54.00  from holding Tsingtao Brewery or generate 8.85% return on investment over 90 days.

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

Tsingtao Brewery  vs.  USWE SPORTS AB

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. In spite of fragile performance in the last few months, the Stock's forward 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.

USWE SPORTS AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and USWE SPORTS

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

The idea behind Tsingtao Brewery and USWE SPORTS AB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.