Correlation Between Kweichow Moutai and Suzhou TAA

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Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and Suzhou TAA 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 Kweichow Moutai and Suzhou TAA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kweichow Moutai Co and Suzhou TAA Ultra, you can compare the effects of market volatilities on Kweichow Moutai and Suzhou TAA 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 Kweichow Moutai with a short position of Suzhou TAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and Suzhou TAA.

Diversification Opportunities for Kweichow Moutai and Suzhou TAA

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Kweichow and Suzhou is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Suzhou TAA Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou TAA Ultra and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with Suzhou TAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou TAA Ultra has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Suzhou TAA go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Suzhou TAA

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.55 times more return on investment than Suzhou TAA. However, Kweichow Moutai Co is 1.82 times less risky than Suzhou TAA. It trades about -0.03 of its potential returns per unit of risk. Suzhou TAA Ultra is currently generating about -0.05 per unit of risk. If you would invest  184,665  in Kweichow Moutai Co on November 9, 2024 and sell it today you would lose (43,381) from holding Kweichow Moutai Co or give up 23.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy65.26%
ValuesDaily Returns

Kweichow Moutai Co  vs.  Suzhou TAA Ultra

 Performance 
       Timeline  
Kweichow Moutai 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Kweichow Moutai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Suzhou TAA Ultra 

Risk-Adjusted Performance

Excellent

 
Weak
 
Strong
Over the last 90 days Suzhou TAA Ultra has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Suzhou TAA sustained solid returns over the last few months and may actually be approaching a breakup point.

Kweichow Moutai and Suzhou TAA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kweichow Moutai and Suzhou TAA

The main advantage of trading using opposite Kweichow Moutai and Suzhou TAA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kweichow Moutai position performs unexpectedly, Suzhou TAA 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 Suzhou TAA will offset losses from the drop in Suzhou TAA's long position.
The idea behind Kweichow Moutai Co and Suzhou TAA Ultra 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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