Correlation Between Shan Dong and Quectel Wireless

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

By analyzing existing cross correlation between Shan Dong Dong E and Quectel Wireless Solutions, you can compare the effects of market volatilities on Shan Dong and Quectel Wireless 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 Shan Dong with a short position of Quectel Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Dong and Quectel Wireless.

Diversification Opportunities for Shan Dong and Quectel Wireless

-0.51

Correlation Coefficient

Shan Dong  Quectel Wireless

Excellent diversification

The 3 months correlation between Shan and Quectel is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Shan Dong Dong E and Quectel Wireless Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quectel Wireless Sol and Shan Dong 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 Shan Dong Dong E are associated (or correlated) with Quectel Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quectel Wireless Sol has no effect on the direction of Shan Dong i.e., Shan Dong and Quectel Wireless go up and down completely randomly.

Pair Corralation between Shan Dong and Quectel Wireless

Assuming the 90 days trading horizon Shan Dong Dong E is expected to under-perform the Quectel Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Shan Dong Dong E is 2.94 times less risky than Quectel Wireless. The stock trades about -0.08 of its potential returns per unit of risk. The Quectel Wireless Solutions is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,516  in Quectel Wireless Solutions on December 24, 2024 and sell it today you would earn a total of  2,095  from holding Quectel Wireless Solutions or generate 32.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Shan Dong Dong E  vs.  Quectel Wireless Solutions

Shan Dong Dong

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shan Dong Dong E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Quectel Wireless Sol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quectel Wireless Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Quectel Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shan Dong and Quectel Wireless

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

The idea behind Shan Dong Dong E and Quectel Wireless Solutions 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.