Correlation Between WP Carey and Tsingtao Brewery

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

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

Diversification Opportunities for WP Carey and Tsingtao Brewery

0.27

Correlation Coefficient

WP Carey  Tsingtao Brewery

Modest diversification

The 3 months correlation between WPY and Tsingtao is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding WP Carey and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and WP Carey 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 WP Carey are associated (or correlated) with Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of WP Carey i.e., WP Carey and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between WP Carey and Tsingtao Brewery

Assuming the 90 days trading horizon WP Carey is expected to generate 13.32 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, WP Carey is 2.11 times less risky than Tsingtao Brewery. It trades about 0.0 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  661.00  in Tsingtao Brewery on October 8, 2024 and sell it today you would lose (1.00) from holding Tsingtao Brewery or give up 0.15% of portfolio value over 90 days.

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

WP Carey  vs.  Tsingtao Brewery

WP Carey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WP Carey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WP Carey is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WP Carey and Tsingtao Brewery

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

The idea behind WP Carey and Tsingtao Brewery 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.