Correlation Between Tsingtao Brewery and AURUBIS AG

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

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

Diversification Opportunities for Tsingtao Brewery and AURUBIS AG

-0.21

Correlation Coefficient

Tsingtao Brewery  AURUBIS AG

Very good diversification

The 3 months correlation between Tsingtao and AURUBIS is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and AURUBIS AG UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS AG UNSPADR 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 AURUBIS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS AG UNSPADR has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and AURUBIS AG go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and AURUBIS AG

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.63 times more return on investment than AURUBIS AG. However, Tsingtao Brewery is 1.63 times more volatile than AURUBIS AG UNSPADR. It trades about 0.09 of its potential returns per unit of risk. AURUBIS AG UNSPADR is currently generating about 0.03 per unit of risk. If you would invest  395.00  in Tsingtao Brewery on September 23, 2024 and sell it today you would earn a total of  262.00  from holding Tsingtao Brewery or generate 66.33% 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.  AURUBIS AG UNSPADR

Tsingtao Brewery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 10 (%) 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.

AURUBIS AG UNSPADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS AG UNSPADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AURUBIS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and AURUBIS AG

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

The idea behind Tsingtao Brewery and AURUBIS AG UNSPADR 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.