Correlation Between Kweichow Moutai and Shantui Construction

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

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

Diversification Opportunities for Kweichow Moutai and Shantui Construction

0.57

Correlation Coefficient

Kweichow Moutai  Shantui Construction

Very weak diversification

The 3 months correlation between Kweichow and Shantui is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Shantui Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantui Construction and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with Shantui Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantui Construction has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Shantui Construction go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Shantui Construction

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 4.45 times less return on investment than Shantui Construction. But when comparing it to its historical volatility, Kweichow Moutai Co is 1.21 times less risky than Shantui Construction. It trades about 0.07 of its potential returns per unit of risk. Shantui Construction Machinery is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  666.00  in Shantui Construction Machinery on September 4, 2024 and sell it today you would earn a total of  376.00  from holding Shantui Construction Machinery or generate 56.46% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Shantui Construction Machinery

Kweichow Moutai

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shantui Construction

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantui Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Shantui Construction

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

The idea behind Kweichow Moutai Co and Shantui Construction Machinery 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.