Correlation Between Qingdao Foods and Beijing Ultrapower

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

Diversification Opportunities for Qingdao Foods and Beijing Ultrapower

0.2

Correlation Coefficient

Qingdao Foods  Beijing Ultrapower

Modest diversification

The 3 months correlation between Qingdao and Beijing is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Beijing Ultrapower Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Ultrapower 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 Beijing Ultrapower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Ultrapower has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Beijing Ultrapower go up and down completely randomly.

Pair Corralation between Qingdao Foods and Beijing Ultrapower

Assuming the 90 days trading horizon Qingdao Foods is expected to generate 11.07 times less return on investment than Beijing Ultrapower. But when comparing it to its historical volatility, Qingdao Foods Co is 1.85 times less risky than Beijing Ultrapower. It trades about 0.01 of its potential returns per unit of risk. Beijing Ultrapower Software is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  488.00  in Beijing Ultrapower Software on October 22, 2024 and sell it today you would earn a total of  671.00  from holding Beijing Ultrapower Software or generate 137.5% return on investment over 90 days.

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

Qingdao Foods Co  vs.  Beijing Ultrapower Software

Qingdao Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 5 (%) 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.

Beijing Ultrapower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Ultrapower Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Qingdao Foods and Beijing Ultrapower

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

The idea behind Qingdao Foods Co and Beijing Ultrapower Software 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.