Correlation Between CN MODERN and Tsingtao Brewery
Can any of the company-specific risk be diversified away by investing in both CN MODERN 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 CN MODERN and Tsingtao Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Tsingtao Brewery, you can compare the effects of market volatilities on CN MODERN 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 CN MODERN with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Tsingtao Brewery.
Diversification Opportunities for CN MODERN and Tsingtao Brewery
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 07M and Tsingtao is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and CN MODERN 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 CN MODERN DAIRY 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 CN MODERN i.e., CN MODERN and Tsingtao Brewery go up and down completely randomly.
Pair Corralation between CN MODERN and Tsingtao Brewery
Assuming the 90 days trading horizon CN MODERN is expected to generate 1.37 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, CN MODERN DAIRY is 1.3 times less risky than Tsingtao Brewery. It trades about 0.03 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 501.00 in Tsingtao Brewery on September 20, 2024 and sell it today you would earn a total of 152.00 from holding Tsingtao Brewery or generate 30.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Tsingtao Brewery
Performance |
| Timeline |
| CN MODERN DAIRY |
| Tsingtao Brewery |
CN MODERN and Tsingtao Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Tsingtao Brewery
The main advantage of trading using opposite CN MODERN and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN 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 CN MODERN DAIRY 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.| Tsingtao Brewery vs. Apple Inc | Tsingtao Brewery vs. Apple Inc | Tsingtao Brewery vs. Apple Inc | Tsingtao Brewery vs. Microsoft |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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