Correlation Between Qingdao Foods and Guangzhou Jointas

Can any of the company-specific risk be diversified away by investing in both Qingdao Foods and Guangzhou Jointas 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 Guangzhou Jointas 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 Guangzhou Jointas Chemical, you can compare the effects of market volatilities on Qingdao Foods and Guangzhou Jointas 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 Guangzhou Jointas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Foods and Guangzhou Jointas.

Diversification Opportunities for Qingdao Foods and Guangzhou Jointas

-0.04

Correlation Coefficient

Qingdao Foods  Guangzhou Jointas

Good diversification

The 3 months correlation between Qingdao and Guangzhou is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas 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 Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between Qingdao Foods and Guangzhou Jointas

Assuming the 90 days trading horizon Qingdao Foods Co is expected to under-perform the Guangzhou Jointas. But the stock apears to be less risky and, when comparing its historical volatility, Qingdao Foods Co is 1.22 times less risky than Guangzhou Jointas. The stock trades about -0.06 of its potential returns per unit of risk. The Guangzhou Jointas Chemical is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Guangzhou Jointas Chemical on December 27, 2024 and sell it today you would earn a total of  86.00  from holding Guangzhou Jointas Chemical or generate 16.7% return on investment over 90 days.

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

Qingdao Foods Co  vs.  Guangzhou Jointas Chemical

Qingdao Foods

Risk-Adjusted Performance

Very Weak

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

Guangzhou Jointas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Jointas Chemical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Jointas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qingdao Foods and Guangzhou Jointas

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

The idea behind Qingdao Foods Co and Guangzhou Jointas Chemical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.