Correlation Between Shantui Construction and Quectel Wireless

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

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

Diversification Opportunities for Shantui Construction and Quectel Wireless

0.22

Correlation Coefficient

Shantui Construction  Quectel Wireless

Modest diversification

The 3 months correlation between Shantui and Quectel is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery 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 Shantui Construction 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 Shantui Construction Machinery 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 Shantui Construction i.e., Shantui Construction and Quectel Wireless go up and down completely randomly.

Pair Corralation between Shantui Construction and Quectel Wireless

Assuming the 90 days trading horizon Shantui Construction Machinery is expected to under-perform the Quectel Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Shantui Construction Machinery is 3.0 times less risky than Quectel Wireless. The stock trades about -0.1 of its potential returns per unit of risk. The Quectel Wireless Solutions is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,395  in Quectel Wireless Solutions on October 10, 2024 and sell it today you would earn a total of  844.00  from holding Quectel Wireless Solutions or generate 15.64% return on investment over 90 days.

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

Shantui Construction Machinery  vs.  Quectel Wireless Solutions

Shantui Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantui Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Quectel Wireless Sol

Risk-Adjusted Performance

10 of 100

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 Shantui Construction and Quectel Wireless

The main advantage of trading using opposite Shantui Construction and Quectel Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shantui Construction 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 Shantui Construction Machinery 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.