Correlation Between Tsingtao Brewery and Sandfire Resources

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

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

Diversification Opportunities for Tsingtao Brewery and Sandfire Resources

0.09

Correlation Coefficient

Tsingtao Brewery  Sandfire Resources

Significant diversification

The 3 months correlation between Tsingtao and Sandfire is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Sandfire Resources go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Sandfire Resources

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.89 times more return on investment than Sandfire Resources. However, Tsingtao Brewery is 1.89 times more volatile than Sandfire Resources Limited. It trades about 0.07 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about 0.07 per unit of risk. If you would invest  362.00  in Tsingtao Brewery on October 6, 2024 and sell it today you would earn a total of  302.00  from holding Tsingtao Brewery or generate 83.43% 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.  Sandfire Resources Limited

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.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandfire Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tsingtao Brewery and Sandfire Resources

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

The idea behind Tsingtao Brewery and Sandfire Resources Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.