Correlation Between CHINA BANK and Tsingtao Brewery

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

By analyzing existing cross correlation between CHINA BANK ADR20 and Tsingtao Brewery, you can compare the effects of market volatilities on CHINA BANK 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 CHINA BANK with a short position of Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA BANK and Tsingtao Brewery.

Diversification Opportunities for CHINA BANK and Tsingtao Brewery

-0.83

Correlation Coefficient

CHINA BANK  Tsingtao Brewery

Pay attention - limited upside

The 3 months correlation between CHINA and Tsingtao is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery and CHINA BANK 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 CHINA BANK ADR20 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 CHINA BANK i.e., CHINA BANK and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between CHINA BANK and Tsingtao Brewery

Assuming the 90 days trading horizon CHINA BANK ADR20 is expected to generate 1.06 times more return on investment than Tsingtao Brewery. However, CHINA BANK is 1.06 times more volatile than Tsingtao Brewery. It trades about 0.17 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.07 per unit of risk. If you would invest  1,447  in CHINA BANK ADR20 on April 24, 2025 and sell it today you would earn a total of  323.00  from holding CHINA BANK ADR20 or generate 22.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

CHINA BANK ADR20  vs.  Tsingtao Brewery

CHINA BANK ADR20

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CHINA BANK reported solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Brewery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHINA BANK and Tsingtao Brewery

The main advantage of trading using opposite CHINA BANK and Tsingtao Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA BANK 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 CHINA BANK ADR20 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.