Correlation Between Carsales and Tsingtao Brewery
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Tsingtao Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Tsingtao Brewery, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Tsingtao Brewery.
Diversification Opportunities for Carsales and Tsingtao Brewery
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carsales and Tsingtao is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Carsales and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Carsales 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 Carsales 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 Carsales i.e., Carsales and Tsingtao Brewery go up and down completely randomly.
Pair Corralation between Carsales and Tsingtao Brewery
Assuming the 90 days trading horizon Carsales is expected to generate 0.46 times more return on investment than Tsingtao Brewery. However, Carsales is 2.2 times less risky than Tsingtao Brewery. It trades about 0.09 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.03 per unit of risk. If you would invest 1,282 in Carsales on September 3, 2024 and sell it today you would earn a total of 1,258 from holding Carsales or generate 98.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Tsingtao Brewery
Performance |
| Timeline |
| Carsales |
| Tsingtao Brewery |
Carsales and Tsingtao Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Tsingtao Brewery
The main advantage of trading using opposite Carsales and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. Thai Beverage Public | Carsales vs. Premier Foods PLC | Carsales vs. Food Life Companies | Carsales vs. CN MODERN DAIRY |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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