Correlation Between Tsingtao Brewery and Columbia Sportswear

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

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

Diversification Opportunities for Tsingtao Brewery and Columbia Sportswear

0.3

Correlation Coefficient

Tsingtao Brewery  Columbia Sportswear

Weak diversification

The 3 months correlation between Tsingtao and Columbia is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Columbia Sportswear

Assuming the 90 days trading horizon Tsingtao Brewery is expected to under-perform the Columbia Sportswear. In addition to that, Tsingtao Brewery is 1.29 times more volatile than Columbia Sportswear. It trades about -0.05 of its total potential returns per unit of risk. Columbia Sportswear is currently generating about 0.2 per unit of volatility. If you would invest  6,923  in Columbia Sportswear on October 27, 2024 and sell it today you would earn a total of  1,477  from holding Columbia Sportswear or generate 21.33% return on investment over 90 days.

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

Tsingtao Brewery  vs.  Columbia Sportswear

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 latest uncertain performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Columbia Sportswear

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Columbia Sportswear

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

The idea behind Tsingtao Brewery and Columbia Sportswear 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.