Correlation Between Tsingtao Brewery and Carpenter Technology

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

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

Diversification Opportunities for Tsingtao Brewery and Carpenter Technology

-0.31

Correlation Coefficient

Tsingtao Brewery  Carpenter Technology

Very good diversification

The 3 months correlation between Tsingtao and Carpenter is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology 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 are associated (or correlated) with Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Carpenter Technology go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Carpenter Technology

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 1.35 times more return on investment than Carpenter Technology. However, Tsingtao Brewery is 1.35 times more volatile than Carpenter Technology. It trades about 0.11 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.08 per unit of risk. If you would invest  533.00  in Tsingtao Brewery on September 25, 2024 and sell it today you would earn a total of  127.00  from holding Tsingtao Brewery or generate 23.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Tsingtao Brewery  vs.  Carpenter Technology

Tsingtao Brewery

Risk-Adjusted Performance

8 of 100

OK

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

Carpenter Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Carpenter Technology

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

The idea behind Tsingtao Brewery and Carpenter 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.