Correlation Between Tsingtao Brewery and Cars

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

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

Diversification Opportunities for Tsingtao Brewery and Cars

-0.36

Correlation Coefficient

Tsingtao Brewery  Cars

Very good diversification

The 3 months correlation between Tsingtao and Cars is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Cars go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Cars

Assuming the 90 days horizon Tsingtao Brewery is expected to generate 1.56 times more return on investment than Cars. However, Tsingtao Brewery is 1.56 times more volatile than Cars Inc. It trades about 0.09 of its potential returns per unit of risk. Cars Inc is currently generating about 0.11 per unit of risk. If you would invest  494.00  in Tsingtao Brewery on September 3, 2024 and sell it today you would earn a total of  95.00  from holding Tsingtao Brewery or generate 19.23% return on investment over 90 days.

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

Tsingtao Brewery  vs.  Cars Inc

Tsingtao Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tsingtao Brewery reported solid returns over the last few months and may actually be approaching a breakup point.

Cars Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cars reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Cars

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

The idea behind Tsingtao Brewery and Cars Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.