Correlation Between Rongcheer Industrial and Tsingtao Brewery

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

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

Diversification Opportunities for Rongcheer Industrial and Tsingtao Brewery

0.8

Correlation Coefficient

Rongcheer Industrial  Tsingtao Brewery

Very poor diversification

The 3 months correlation between Rongcheer and Tsingtao is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rongcheer Industrial Technolog and Tsingtao Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Rongcheer Industrial 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 Rongcheer Industrial Technology 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 Rongcheer Industrial i.e., Rongcheer Industrial and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Rongcheer Industrial and Tsingtao Brewery

Assuming the 90 days trading horizon Rongcheer Industrial Technology is expected to generate 1.83 times more return on investment than Tsingtao Brewery. However, Rongcheer Industrial is 1.83 times more volatile than Tsingtao Brewery Co. It trades about 0.03 of its potential returns per unit of risk. Tsingtao Brewery Co is currently generating about 0.03 per unit of risk. If you would invest  5,632  in Rongcheer Industrial Technology on September 28, 2024 and sell it today you would earn a total of  118.00  from holding Rongcheer Industrial Technology or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Rongcheer Industrial Technolog  vs.  Tsingtao Brewery Co

Rongcheer Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rongcheer Industrial Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongcheer Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tsingtao Brewery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tsingtao Brewery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rongcheer Industrial and Tsingtao Brewery

The main advantage of trading using opposite Rongcheer Industrial and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rongcheer Industrial 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 Rongcheer Industrial Technology 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.