Correlation Between Runjian Communication and Qingdao Foods

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

By analyzing existing cross correlation between Runjian Communication Co and Qingdao Foods Co, you can compare the effects of market volatilities on Runjian Communication and Qingdao Foods 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 Runjian Communication with a short position of Qingdao Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Runjian Communication and Qingdao Foods.

Diversification Opportunities for Runjian Communication and Qingdao Foods

0.64

Correlation Coefficient

Runjian Communication  Qingdao Foods

Poor diversification

The 3 months correlation between Runjian and Qingdao is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and Qingdao Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Foods and Runjian Communication 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 Runjian Communication Co are associated (or correlated) with Qingdao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Foods has no effect on the direction of Runjian Communication i.e., Runjian Communication and Qingdao Foods go up and down completely randomly.

Pair Corralation between Runjian Communication and Qingdao Foods

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 1.01 times more return on investment than Qingdao Foods. However, Runjian Communication is 1.01 times more volatile than Qingdao Foods Co. It trades about 0.12 of its potential returns per unit of risk. Qingdao Foods Co is currently generating about 0.11 per unit of risk. If you would invest  2,771  in Runjian Communication Co on September 26, 2024 and sell it today you would earn a total of  641.00  from holding Runjian Communication Co or generate 23.13% return on investment over 90 days.

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

Runjian Communication Co  vs.  Qingdao Foods Co

Runjian Communication

Risk-Adjusted Performance

9 of 100

OK

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

Qingdao Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 8 (%) 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.

Pair Trading with Runjian Communication and Qingdao Foods

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

The idea behind Runjian Communication Co and Qingdao Foods Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.