Correlation Between Tsingtao Brewery and CHINA TELECOM

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

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

Diversification Opportunities for Tsingtao Brewery and CHINA TELECOM

0.38

Correlation Coefficient

Tsingtao Brewery  CHINA TELECOM

Weak diversification

The 3 months correlation between Tsingtao and CHINA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and CHINA TELECOM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TELECOM H 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 CHINA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA TELECOM H has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and CHINA TELECOM go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and CHINA TELECOM

If you would invest  587.00  in Tsingtao Brewery on September 19, 2024 and sell it today you would earn a total of  80.00  from holding Tsingtao Brewery or generate 13.63% return on investment over 90 days.

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

Tsingtao Brewery  vs.  CHINA TELECOM H

Tsingtao Brewery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 12 (%) 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.

CHINA TELECOM H

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA TELECOM H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tsingtao Brewery and CHINA TELECOM

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

The idea behind Tsingtao Brewery and CHINA TELECOM H 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.