Correlation Between Tsingtao Brewery and Union Pacific

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Can any of the company-specific risk be diversified away by investing in both Tsingtao Brewery and Union Pacific 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 Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tsingtao Brewery Co and Union Pacific, you can compare the effects of market volatilities on Tsingtao Brewery and Union Pacific 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 Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tsingtao Brewery and Union Pacific.

Diversification Opportunities for Tsingtao Brewery and Union Pacific

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Tsingtao and Union is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery Co and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Co are associated (or correlated) with Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Union Pacific go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Union Pacific

Assuming the 90 days horizon Tsingtao Brewery Co is expected to generate 1.49 times more return on investment than Union Pacific. However, Tsingtao Brewery is 1.49 times more volatile than Union Pacific. It trades about 0.37 of its potential returns per unit of risk. Union Pacific is currently generating about 0.12 per unit of risk. If you would invest  4,256  in Tsingtao Brewery Co on September 9, 2022 and sell it today you would earn a total of  882.00  from holding Tsingtao Brewery Co or generate 20.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tsingtao Brewery Co  vs.  Union Pacific

 Performance (%) 
       Timeline  
Tsingtao Brewery 
Tsingtao Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Tsingtao Brewery showed solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Price Channel

Union Pacific 
Union Performance
0 of 100
Over the last 90 days Union Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Union Price Channel

Tsingtao Brewery and Union Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tsingtao Brewery and Union Pacific

The main advantage of trading using opposite Tsingtao Brewery and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific's long position.
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The idea behind Tsingtao Brewery Co and Union Pacific 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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Check out your portfolio center. 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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