Correlation Between China Resources and Tsingtao Brewery
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Tsingtao Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Tsingtao Brewery, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Tsingtao Brewery.
Diversification Opportunities for China Resources and Tsingtao Brewery
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and Tsingtao is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Tsingtao Brewery go up and down completely randomly.
Pair Corralation between China Resources and Tsingtao Brewery
Assuming the 90 days horizon China Resources is expected to generate 2.88 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, China Resources Beer is 1.33 times less risky than Tsingtao Brewery. It trades about 0.01 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 569.00 in Tsingtao Brewery on August 28, 2024 and sell it today you would lose (14.00) from holding Tsingtao Brewery or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 79.81% |
| Values | Daily Returns |
China Resources Beer vs. Tsingtao Brewery
Performance |
| Timeline |
| China Resources Beer |
| Tsingtao Brewery |
China Resources and Tsingtao Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Tsingtao Brewery
The main advantage of trading using opposite China Resources and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. Budweiser Brewing | China Resources vs. Anheuser Busch InBev SANV | China Resources vs. Anheuser Busch Inbev | China Resources vs. Molson Coors Brewing |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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