Correlation Between Bus Online and Kweichow Moutai

Can any of the company-specific risk be diversified away by investing in both Bus Online and Kweichow Moutai 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 Bus Online and Kweichow Moutai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bus Online Co and Kweichow Moutai Co, you can compare the effects of market volatilities on Bus Online and Kweichow Moutai 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 Bus Online with a short position of Kweichow Moutai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bus Online and Kweichow Moutai.

Diversification Opportunities for Bus Online and Kweichow Moutai

0.64

Correlation Coefficient

Bus Online  Kweichow Moutai

Poor diversification

The 3 months correlation between Bus and Kweichow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bus Online Co and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai and Bus Online 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 Bus Online Co are associated (or correlated) with Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Bus Online i.e., Bus Online and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Bus Online and Kweichow Moutai

Assuming the 90 days trading horizon Bus Online is expected to generate 1.02 times less return on investment than Kweichow Moutai. In addition to that, Bus Online is 1.14 times more volatile than Kweichow Moutai Co. It trades about 0.12 of its total potential returns per unit of risk. Kweichow Moutai Co is currently generating about 0.15 per unit of volatility. If you would invest  126,100  in Kweichow Moutai Co on September 19, 2024 and sell it today you would earn a total of  29,700  from holding Kweichow Moutai Co or generate 23.55% return on investment over 90 days.

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

Bus Online Co  vs.  Kweichow Moutai Co

Bus Online

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bus Online Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bus Online sustained solid returns over the last few months and may actually be approaching a breakup point.

Kweichow Moutai

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Bus Online and Kweichow Moutai

The main advantage of trading using opposite Bus Online and Kweichow Moutai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bus Online position performs unexpectedly, Kweichow Moutai 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 Kweichow Moutai will offset losses from the drop in Kweichow Moutai's long position.

The idea behind Bus Online Co and Kweichow Moutai 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.