Correlation Between Qingdao Gon and Dazhong Transportation

Can any of the company-specific risk be diversified away by investing in both Qingdao Gon and Dazhong Transportation 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 Gon and Dazhong Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qingdao Gon Technology and Dazhong Transportation Group, you can compare the effects of market volatilities on Qingdao Gon and Dazhong Transportation 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 Gon with a short position of Dazhong Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Gon and Dazhong Transportation.

Diversification Opportunities for Qingdao Gon and Dazhong Transportation

0.31

Correlation Coefficient

Qingdao Gon  Dazhong Transportation

Weak diversification

The 3 months correlation between Qingdao and Dazhong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Gon Technology and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation and Qingdao Gon 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 Gon Technology are associated (or correlated) with Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Qingdao Gon i.e., Qingdao Gon and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Qingdao Gon and Dazhong Transportation

Assuming the 90 days trading horizon Qingdao Gon Technology is expected to generate 0.8 times more return on investment than Dazhong Transportation. However, Qingdao Gon Technology is 1.24 times less risky than Dazhong Transportation. It trades about 0.07 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about -0.02 per unit of risk. If you would invest  2,078  in Qingdao Gon Technology on October 11, 2024 and sell it today you would earn a total of  162.00  from holding Qingdao Gon Technology or generate 7.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Qingdao Gon Technology  vs.  Dazhong Transportation Group

Qingdao Gon Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Gon Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Gon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dazhong Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dazhong Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dazhong Transportation 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 Gon and Dazhong Transportation

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

The idea behind Qingdao Gon Technology and Dazhong Transportation Group 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.