Correlation Between Tsingtao Brewery and Rongcheer Industrial

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

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

Diversification Opportunities for Tsingtao Brewery and Rongcheer Industrial

0.8

Correlation Coefficient

Tsingtao Brewery  Rongcheer Industrial

Very poor diversification

The 3 months correlation between Tsingtao and Rongcheer is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery Co and Rongcheer Industrial Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongcheer Industrial and Tsingtao Brewery 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 Tsingtao Brewery Co are associated (or correlated) with Rongcheer Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongcheer Industrial has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Rongcheer Industrial go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Rongcheer Industrial

Assuming the 90 days trading horizon Tsingtao Brewery Co is expected to under-perform the Rongcheer Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Tsingtao Brewery Co is 2.26 times less risky than Rongcheer Industrial. The stock trades about -0.02 of its potential returns per unit of risk. The Rongcheer Industrial Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,487  in Rongcheer Industrial Technology on September 28, 2024 and sell it today you would lose (737.00) from holding Rongcheer Industrial Technology or give up 11.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.36%
Values	Daily Returns

Tsingtao Brewery Co  vs.  Rongcheer Industrial Technolog

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.

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.

Pair Trading with Tsingtao Brewery and Rongcheer Industrial

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

The idea behind Tsingtao Brewery Co and Rongcheer Industrial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.