Correlation Between Transport International and Tsingtao Brewery
Can any of the company-specific risk be diversified away by investing in both Transport International 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 Transport International and Tsingtao Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transport International Holdings and Tsingtao Brewery, you can compare the effects of market volatilities on Transport International 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 Transport International with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and Tsingtao Brewery.
Diversification Opportunities for Transport International and Tsingtao Brewery
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transport and Tsingtao is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and Tsingtao Brewery go up and down completely randomly.
Pair Corralation between Transport International and Tsingtao Brewery
Assuming the 90 days horizon Transport International Holdings is expected to generate 0.55 times more return on investment than Tsingtao Brewery. However, Transport International Holdings is 1.81 times less risky than Tsingtao Brewery. It trades about -0.14 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.35 per unit of risk. If you would invest 96.00 in Transport International Holdings on October 28, 2024 and sell it today you would lose (2.00) from holding Transport International Holdings or give up 2.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transport International Holdin vs. Tsingtao Brewery
Performance |
| Timeline |
| Transport International |
| Tsingtao Brewery |
Transport International and Tsingtao Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transport International and Tsingtao Brewery
The main advantage of trading using opposite Transport International and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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