Correlation Between Qingdao Foods and NBTM New

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

Diversification Opportunities for Qingdao Foods and NBTM New

0.05

Correlation Coefficient

Qingdao Foods  NBTM New

Significant diversification

The 3 months correlation between Qingdao and NBTM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and NBTM New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBTM New Materials 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 NBTM New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBTM New Materials has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and NBTM New go up and down completely randomly.

Pair Corralation between Qingdao Foods and NBTM New

Assuming the 90 days trading horizon Qingdao Foods is expected to generate 6.51 times less return on investment than NBTM New. But when comparing it to its historical volatility, Qingdao Foods Co is 1.45 times less risky than NBTM New. It trades about 0.01 of its potential returns per unit of risk. NBTM New Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  917.00  in NBTM New Materials on October 4, 2024 and sell it today you would earn a total of  700.00  from holding NBTM New Materials or generate 76.34% return on investment over 90 days.

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

Qingdao Foods Co  vs.  NBTM New Materials

Qingdao Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 2 (%) 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.

NBTM New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Qingdao Foods and NBTM New

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

The idea behind Qingdao Foods Co and NBTM New Materials 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.