Correlation Between Tsingtao Brewery and North American

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

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

Diversification Opportunities for Tsingtao Brewery and North American

0.07

Correlation Coefficient

Tsingtao Brewery  North American

Significant diversification

The 3 months correlation between Tsingtao and North is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and North American go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and North American

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.88 times more return on investment than North American. However, Tsingtao Brewery is 1.88 times more volatile than North American Construction. It trades about 0.08 of its potential returns per unit of risk. North American Construction is currently generating about 0.01 per unit of risk. If you would invest  335.00  in Tsingtao Brewery on October 14, 2024 and sell it today you would earn a total of  300.00  from holding Tsingtao Brewery or generate 89.55% return on investment over 90 days.

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

Tsingtao Brewery  vs.  North American Construction

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 fragile 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.

North American Const

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and North American

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

The idea behind Tsingtao Brewery and North American Construction 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .