Correlation Between Tsingtao Brewery and Norfolk Southern

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

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

Diversification Opportunities for Tsingtao Brewery and Norfolk Southern

-0.68

Correlation Coefficient

Tsingtao Brewery  Norfolk Southern

Excellent diversification

The 3 months correlation between Tsingtao and Norfolk is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Norfolk Southern go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Norfolk Southern

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.12 times more return on investment than Norfolk Southern. However, Tsingtao Brewery is 1.12 times more volatile than Norfolk Southern. It trades about 0.3 of its potential returns per unit of risk. Norfolk Southern is currently generating about -0.27 per unit of risk. If you would invest  606.00  in Tsingtao Brewery on October 9, 2024 and sell it today you would earn a total of  53.00  from holding Tsingtao Brewery or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

Tsingtao Brewery  vs.  Norfolk Southern

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 rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Norfolk Southern

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norfolk Southern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tsingtao Brewery and Norfolk Southern

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

The idea behind Tsingtao Brewery and Norfolk Southern 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..