Correlation Between Tsingtao Brewery and Constellation Software

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

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

Diversification Opportunities for Tsingtao Brewery and Constellation Software

-0.16

Correlation Coefficient

Tsingtao Brewery  Constellation Software

Good diversification

The 3 months correlation between Tsingtao and Constellation is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Constellation Software go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Constellation Software

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 3.39 times less return on investment than Constellation Software. But when comparing it to its historical volatility, Tsingtao Brewery is 1.16 times less risky than Constellation Software. It trades about 0.01 of its potential returns per unit of risk. Constellation Software is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  287,905  in Constellation Software on October 24, 2024 and sell it today you would earn a total of  8,095  from holding Constellation Software or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Tsingtao Brewery  vs.  Constellation Software

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.

Constellation Software

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Constellation Software is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tsingtao Brewery and Constellation Software

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

The idea behind Tsingtao Brewery and Constellation Software 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.