Correlation Between Tsingtao Brewery and Suncorp Group

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

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

Diversification Opportunities for Tsingtao Brewery and Suncorp Group

-0.41

Correlation Coefficient

Tsingtao Brewery  Suncorp Group

Very good diversification

The 3 months correlation between Tsingtao and Suncorp is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Suncorp Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncorp Group Limited 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 Suncorp Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncorp Group Limited has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Suncorp Group go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Suncorp Group

Assuming the 90 days trading horizon Tsingtao Brewery is expected to under-perform the Suncorp Group. In addition to that, Tsingtao Brewery is 1.61 times more volatile than Suncorp Group Limited. It trades about -0.01 of its total potential returns per unit of risk. Suncorp Group Limited is currently generating about 0.02 per unit of volatility. If you would invest  1,110  in Suncorp Group Limited on September 30, 2024 and sell it today you would earn a total of  20.00  from holding Suncorp Group Limited or generate 1.8% return on investment over 90 days.

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

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

Suncorp Group Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suncorp Group Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Suncorp Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tsingtao Brewery and Suncorp Group

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

The idea behind Tsingtao Brewery and Suncorp Group 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.