Correlation Between Longxing Chemical and Queclink Wireless

Can any of the company-specific risk be diversified away by investing in both Longxing Chemical and Queclink Wireless 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 Longxing Chemical and Queclink Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Longxing Chemical Stock and Queclink Wireless Solutions, you can compare the effects of market volatilities on Longxing Chemical and Queclink Wireless 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 Longxing Chemical with a short position of Queclink Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longxing Chemical and Queclink Wireless.

Diversification Opportunities for Longxing Chemical and Queclink Wireless

0.24

Correlation Coefficient

Longxing Chemical  Queclink Wireless

Modest diversification

The 3 months correlation between Longxing and Queclink is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Longxing Chemical Stock and Queclink Wireless Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queclink Wireless and Longxing Chemical 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 Longxing Chemical Stock are associated (or correlated) with Queclink Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queclink Wireless has no effect on the direction of Longxing Chemical i.e., Longxing Chemical and Queclink Wireless go up and down completely randomly.

Pair Corralation between Longxing Chemical and Queclink Wireless

Assuming the 90 days trading horizon Longxing Chemical is expected to generate 3.53 times less return on investment than Queclink Wireless. But when comparing it to its historical volatility, Longxing Chemical Stock is 1.41 times less risky than Queclink Wireless. It trades about 0.01 of its potential returns per unit of risk. Queclink Wireless Solutions is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Queclink Wireless Solutions on October 11, 2024 and sell it today you would earn a total of  328.00  from holding Queclink Wireless Solutions or generate 31.33% return on investment over 90 days.

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

Longxing Chemical Stock  vs.  Queclink Wireless Solutions

Longxing Chemical Stock

Risk-Adjusted Performance

9 of 100

OK

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

Queclink Wireless

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Queclink Wireless Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Queclink Wireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Longxing Chemical and Queclink Wireless

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

The idea behind Longxing Chemical Stock and Queclink Wireless Solutions 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.