Correlation Between Kweichow Moutai and China Publishing

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

Diversification Opportunities for Kweichow Moutai and China Publishing

0.53

Correlation Coefficient

Kweichow Moutai  China Publishing

Very weak diversification

The 3 months correlation between Kweichow and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and China Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Publishing Media 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 China Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Publishing Media has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and China Publishing go up and down completely randomly.

Pair Corralation between Kweichow Moutai and China Publishing

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to under-perform the China Publishing. But the stock apears to be less risky and, when comparing its historical volatility, Kweichow Moutai Co is 2.63 times less risky than China Publishing. The stock trades about -0.05 of its potential returns per unit of risk. The China Publishing Media is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  664.00  in China Publishing Media on September 12, 2024 and sell it today you would earn a total of  191.00  from holding China Publishing Media or generate 28.77% 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.  China Publishing Media

Kweichow Moutai

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 8 (%) 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.

China Publishing Media

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Publishing Media are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and China Publishing

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

The idea behind Kweichow Moutai Co and China Publishing Media 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.