Correlation Between Qingdao Foods and Shanghai Junshi

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

Diversification Opportunities for Qingdao Foods and Shanghai Junshi

0.08

Correlation Coefficient

Qingdao Foods  Shanghai Junshi

Significant diversification

The 3 months correlation between Qingdao and Shanghai is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Shanghai Junshi Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Junshi Bios 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 Shanghai Junshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Junshi Bios has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Shanghai Junshi go up and down completely randomly.

Pair Corralation between Qingdao Foods and Shanghai Junshi

Assuming the 90 days trading horizon Qingdao Foods Co is expected to generate 1.31 times more return on investment than Shanghai Junshi. However, Qingdao Foods is 1.31 times more volatile than Shanghai Junshi Biosciences. It trades about 0.04 of its potential returns per unit of risk. Shanghai Junshi Biosciences is currently generating about -0.19 per unit of risk. If you would invest  1,319  in Qingdao Foods Co on October 4, 2024 and sell it today you would earn a total of  54.00  from holding Qingdao Foods Co or generate 4.09% 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.  Shanghai Junshi Biosciences

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.

Shanghai Junshi Bios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Junshi Biosciences 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 Shanghai Junshi

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

The idea behind Qingdao Foods Co and Shanghai Junshi Biosciences 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.