Correlation Between Natural Health and Tsingtao Brewery

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

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

Diversification Opportunities for Natural Health and Tsingtao Brewery

-0.34

Correlation Coefficient

Natural Health  Tsingtao Brewery

Very good diversification

The 3 months correlation between Natural and Tsingtao is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and Natural Health 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 Natural Health Trends 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 Natural Health i.e., Natural Health and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Natural Health and Tsingtao Brewery

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, Natural Health Trends is 2.37 times less risky than Tsingtao Brewery. The stock trades about -0.1 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Tsingtao Brewery on September 26, 2024 and sell it today you would earn a total of  269.00  from holding Tsingtao Brewery or generate 68.8% return on investment over 90 days.

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

Natural Health Trends  vs.  Tsingtao Brewery

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tsingtao Brewery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 5 (%) 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 Natural Health and Tsingtao Brewery

The main advantage of trading using opposite Natural Health and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health 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 Natural Health Trends 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.