Correlation Between Tsingtao Brewery and Eastroc Beverage

Can any of the company-specific risk be diversified away by investing in both Tsingtao Brewery and Eastroc Beverage 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 Eastroc Beverage 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 Eastroc Beverage Group, you can compare the effects of market volatilities on Tsingtao Brewery and Eastroc Beverage 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 Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tsingtao Brewery and Eastroc Beverage.

Diversification Opportunities for Tsingtao Brewery and Eastroc Beverage

0.91

Correlation Coefficient

Tsingtao Brewery  Eastroc Beverage

Almost no diversification

The 3 months correlation between Tsingtao and Eastroc is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery Co and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage 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 Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Eastroc Beverage

Assuming the 90 days trading horizon Tsingtao Brewery Co is expected to generate 1.43 times more return on investment than Eastroc Beverage. However, Tsingtao Brewery is 1.43 times more volatile than Eastroc Beverage Group. It trades about 0.17 of its potential returns per unit of risk. Eastroc Beverage Group is currently generating about 0.21 per unit of risk. If you would invest  5,548  in Tsingtao Brewery Co on September 12, 2024 and sell it today you would earn a total of  1,872  from holding Tsingtao Brewery Co or generate 33.74% return on investment over 90 days.

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

Tsingtao Brewery Co  vs.  Eastroc Beverage Group

Tsingtao Brewery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsingtao Brewery sustained solid returns over the last few months and may actually be approaching a breakup point.

Eastroc Beverage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Eastroc Beverage

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

The idea behind Tsingtao Brewery Co and Eastroc Beverage Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.