Correlation Between SBI Insurance and Tsingtao Brewery

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

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

Diversification Opportunities for SBI Insurance and Tsingtao Brewery

-0.34

Correlation Coefficient

SBI Insurance  Tsingtao Brewery

Very good diversification

The 3 months correlation between SBI and Tsingtao is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SBI Insurance Group and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and SBI Insurance 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 SBI Insurance Group are associated (or correlated) with Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of SBI Insurance i.e., SBI Insurance and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between SBI Insurance and Tsingtao Brewery

Assuming the 90 days trading horizon SBI Insurance is expected to generate 5.29 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, SBI Insurance Group is 2.66 times less risky than Tsingtao Brewery. It trades about 0.04 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Tsingtao Brewery on September 3, 2024 and sell it today you would earn a total of  90.00  from holding Tsingtao Brewery or generate 18.07% return on investment over 90 days.

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

SBI Insurance Group  vs.  Tsingtao Brewery

SBI Insurance Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SBI Insurance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tsingtao Brewery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Insurance and Tsingtao Brewery

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

The idea behind SBI Insurance Group and Tsingtao Brewery 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.