Correlation Between Zhejiang Qianjiang and Impulse Qingdao

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

By analyzing existing cross correlation between Zhejiang Qianjiang Motorcycle and Impulse Qingdao Health, you can compare the effects of market volatilities on Zhejiang Qianjiang and Impulse Qingdao 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 Zhejiang Qianjiang with a short position of Impulse Qingdao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Qianjiang and Impulse Qingdao.

Diversification Opportunities for Zhejiang Qianjiang and Impulse Qingdao

0.5

Correlation Coefficient

Zhejiang Qianjiang  Impulse Qingdao

Very weak diversification

The 3 months correlation between Zhejiang and Impulse is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Qianjiang Motorcycle and Impulse Qingdao Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impulse Qingdao Health and Zhejiang Qianjiang 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 Zhejiang Qianjiang Motorcycle are associated (or correlated) with Impulse Qingdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impulse Qingdao Health has no effect on the direction of Zhejiang Qianjiang i.e., Zhejiang Qianjiang and Impulse Qingdao go up and down completely randomly.

Pair Corralation between Zhejiang Qianjiang and Impulse Qingdao

Assuming the 90 days trading horizon Zhejiang Qianjiang is expected to generate 6.06 times less return on investment than Impulse Qingdao. But when comparing it to its historical volatility, Zhejiang Qianjiang Motorcycle is 1.41 times less risky than Impulse Qingdao. It trades about 0.05 of its potential returns per unit of risk. Impulse Qingdao Health is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,287  in Impulse Qingdao Health on September 12, 2024 and sell it today you would earn a total of  706.00  from holding Impulse Qingdao Health or generate 54.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Zhejiang Qianjiang Motorcycle  vs.  Impulse Qingdao Health

Zhejiang Qianjiang

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Impulse Qingdao Health

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Impulse Qingdao Health are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Impulse Qingdao sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Qianjiang and Impulse Qingdao

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

The idea behind Zhejiang Qianjiang Motorcycle and Impulse Qingdao Health 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.

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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.