Correlation Between CDL INVESTMENT and Tsingtao Brewery

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

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

Diversification Opportunities for CDL INVESTMENT and Tsingtao Brewery

-0.24

Correlation Coefficient

CDL INVESTMENT  Tsingtao Brewery

Very good diversification

The 3 months correlation between CDL and Tsingtao is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT i.e., CDL INVESTMENT and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and Tsingtao Brewery

Assuming the 90 days trading horizon CDL INVESTMENT is expected to under-perform the Tsingtao Brewery. But the stock apears to be less risky and, when comparing its historical volatility, CDL INVESTMENT is 6.92 times less risky than Tsingtao Brewery. The stock trades about -0.24 of its potential returns per unit of risk. The Tsingtao Brewery is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  403.00  in Tsingtao Brewery on April 13, 2024 and sell it today you would earn a total of  187.00  from holding Tsingtao Brewery or generate 46.4% return on investment over 90 days.

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

CDL INVESTMENT  vs.  Tsingtao Brewery

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tsingtao Brewery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDL INVESTMENT and Tsingtao Brewery

The main advantage of trading using opposite CDL INVESTMENT and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT 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 CDL INVESTMENT 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..