Correlation Between Zhongshan Public and Quectel Wireless

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

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

Diversification Opportunities for Zhongshan Public and Quectel Wireless

0.48

Correlation Coefficient

Zhongshan Public  Quectel Wireless

Very weak diversification

The 3 months correlation between Zhongshan and Quectel is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities 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 Zhongshan Public 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 Zhongshan Public Utilities 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 Zhongshan Public i.e., Zhongshan Public and Quectel Wireless go up and down completely randomly.

Pair Corralation between Zhongshan Public and Quectel Wireless

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to under-perform the Quectel Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Zhongshan Public Utilities is 3.18 times less risky than Quectel Wireless. The stock trades about -0.16 of its potential returns per unit of risk. The Quectel Wireless Solutions is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,395  in Quectel Wireless Solutions on October 9, 2024 and sell it today you would earn a total of  1,255  from holding Quectel Wireless Solutions or generate 23.26% return on investment over 90 days.

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

Zhongshan Public Utilities  vs.  Quectel Wireless Solutions

Zhongshan Public Uti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongshan Public Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhongshan Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Quectel Wireless Sol

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quectel Wireless Solutions are ranked lower than 9 (%) 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 Zhongshan Public and Quectel Wireless

The main advantage of trading using opposite Zhongshan Public and Quectel Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongshan Public 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 Zhongshan Public Utilities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.