Correlation Between Qingdao Foods and Runjian Communication

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

Diversification Opportunities for Qingdao Foods and Runjian Communication

0.64

Correlation Coefficient

Qingdao Foods  Runjian Communication

Poor diversification

The 3 months correlation between Qingdao and Runjian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Runjian Communication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Runjian Communication 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 Runjian Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Runjian Communication has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Runjian Communication go up and down completely randomly.

Pair Corralation between Qingdao Foods and Runjian Communication

Assuming the 90 days trading horizon Qingdao Foods is expected to generate 1.12 times less return on investment than Runjian Communication. But when comparing it to its historical volatility, Qingdao Foods Co is 1.01 times less risky than Runjian Communication. It trades about 0.11 of its potential returns per unit of risk. Runjian Communication Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,771  in Runjian Communication Co on September 26, 2024 and sell it today you would earn a total of  641.00  from holding Runjian Communication Co or generate 23.13% return on investment over 90 days.

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

Qingdao Foods Co  vs.  Runjian Communication Co

Qingdao Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Runjian Communication

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Qingdao Foods and Runjian Communication

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

The idea behind Qingdao Foods Co and Runjian Communication Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.