Correlation Between Qingdao Foods and Guangdong Qunxing

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

By analyzing existing cross correlation between Qingdao Foods Co and Guangdong Qunxing Toys, you can compare the effects of market volatilities on Qingdao Foods and Guangdong Qunxing 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 Qingdao Foods with a short position of Guangdong Qunxing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Foods and Guangdong Qunxing.

Diversification Opportunities for Qingdao Foods and Guangdong Qunxing

0.57

Correlation Coefficient

Qingdao Foods  Guangdong Qunxing

Very weak diversification

The 3 months correlation between Qingdao and Guangdong is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Guangdong Qunxing Toys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Qunxing Toys and Qingdao Foods 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 Qingdao Foods Co are associated (or correlated) with Guangdong Qunxing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Qunxing Toys has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Guangdong Qunxing go up and down completely randomly.

Pair Corralation between Qingdao Foods and Guangdong Qunxing

Assuming the 90 days trading horizon Qingdao Foods Co is expected to generate 0.73 times more return on investment than Guangdong Qunxing. However, Qingdao Foods Co is 1.37 times less risky than Guangdong Qunxing. It trades about -0.11 of its potential returns per unit of risk. Guangdong Qunxing Toys is currently generating about -0.08 per unit of risk. If you would invest  1,440  in Qingdao Foods Co on October 10, 2024 and sell it today you would lose (125.00) from holding Qingdao Foods Co or give up 8.68% of portfolio value over 90 days.

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

Qingdao Foods Co  vs.  Guangdong Qunxing Toys

Qingdao Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guangdong Qunxing Toys

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Qunxing Toys are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Qunxing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qingdao Foods and Guangdong Qunxing

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

The idea behind Qingdao Foods Co and Guangdong Qunxing Toys 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.