Correlation Between CITIC Guoan and Tsingtao Brewery

Can any of the company-specific risk be diversified away by investing in both CITIC Guoan 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 CITIC Guoan and Tsingtao Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CITIC Guoan Information and Tsingtao Brewery Co, you can compare the effects of market volatilities on CITIC Guoan 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 CITIC Guoan with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Guoan and Tsingtao Brewery.

Diversification Opportunities for CITIC Guoan and Tsingtao Brewery

0.79

Correlation Coefficient

CITIC Guoan  Tsingtao Brewery

Poor diversification

The 3 months correlation between CITIC and Tsingtao is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and CITIC Guoan 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 CITIC Guoan Information 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 CITIC Guoan i.e., CITIC Guoan and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between CITIC Guoan and Tsingtao Brewery

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.33 times more return on investment than Tsingtao Brewery. However, CITIC Guoan is 1.33 times more volatile than Tsingtao Brewery Co. It trades about 0.22 of its potential returns per unit of risk. Tsingtao Brewery Co is currently generating about 0.15 per unit of risk. If you would invest  225.00  in CITIC Guoan Information on September 5, 2024 and sell it today you would earn a total of  139.00  from holding CITIC Guoan Information or generate 61.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CITIC Guoan Information  vs.  Tsingtao Brewery Co

CITIC Guoan Information

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Brewery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsingtao Brewery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and Tsingtao Brewery

The main advantage of trading using opposite CITIC Guoan and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Guoan 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 CITIC Guoan Information and Tsingtao Brewery Co 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.