Correlation Between Tsingtao Brewery and ITOCHU

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

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

Diversification Opportunities for Tsingtao Brewery and ITOCHU

0.02

Correlation Coefficient

Tsingtao Brewery  ITOCHU

Significant diversification

The 3 months correlation between Tsingtao and ITOCHU is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and ITOCHU go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and ITOCHU

Assuming the 90 days trading horizon Tsingtao Brewery is expected to under-perform the ITOCHU. In addition to that, Tsingtao Brewery is 1.13 times more volatile than ITOCHU. It trades about -0.09 of its total potential returns per unit of risk. ITOCHU is currently generating about 0.01 per unit of volatility. If you would invest  4,339  in ITOCHU on April 22, 2025 and sell it today you would earn a total of  13.00  from holding ITOCHU or generate 0.3% return on investment over 90 days.

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

Tsingtao Brewery  vs.  ITOCHU

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. In spite of latest uncertain performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ITOCHU

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITOCHU is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tsingtao Brewery and ITOCHU

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

The idea behind Tsingtao Brewery and ITOCHU 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.