Correlation Between Kweichow Moutai and SI TECH

Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and SI TECH 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 SI TECH 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 SI TECH Information Technology, you can compare the effects of market volatilities on Kweichow Moutai and SI TECH 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 SI TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and SI TECH.

Diversification Opportunities for Kweichow Moutai and SI TECH

0.79

Correlation Coefficient

Kweichow Moutai  SI TECH

Poor diversification

The 3 months correlation between Kweichow and 300608 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and SI TECH Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SI TECH Information 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 SI TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SI TECH Information has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and SI TECH go up and down completely randomly.

Pair Corralation between Kweichow Moutai and SI TECH

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 2.04 times less return on investment than SI TECH. But when comparing it to its historical volatility, Kweichow Moutai Co is 2.13 times less risky than SI TECH. It trades about 0.13 of its potential returns per unit of risk. SI TECH Information Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  950.00  in SI TECH Information Technology on September 23, 2024 and sell it today you would earn a total of  370.00  from holding SI TECH Information Technology or generate 38.95% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  SI TECH Information Technology

Kweichow Moutai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 10 (%) 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.

SI TECH Information

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Kweichow Moutai and SI TECH

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

The idea behind Kweichow Moutai Co and SI TECH Information Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.