Correlation Between Chongqing Shunbo and Qingdao Haier

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

By analyzing existing cross correlation between Chongqing Shunbo Aluminum and Qingdao Haier Biomedical, you can compare the effects of market volatilities on Chongqing Shunbo and Qingdao Haier 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 Chongqing Shunbo with a short position of Qingdao Haier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Shunbo and Qingdao Haier.

Diversification Opportunities for Chongqing Shunbo and Qingdao Haier

0.53

Correlation Coefficient

Chongqing Shunbo  Qingdao Haier

Very weak diversification

The 3 months correlation between Chongqing and Qingdao is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum and Qingdao Haier Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier Biomedical and Chongqing Shunbo 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 Chongqing Shunbo Aluminum are associated (or correlated) with Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier Biomedical has no effect on the direction of Chongqing Shunbo i.e., Chongqing Shunbo and Qingdao Haier go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Qingdao Haier

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to under-perform the Qingdao Haier. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Shunbo Aluminum is 1.21 times less risky than Qingdao Haier. The stock trades about 0.0 of its potential returns per unit of risk. The Qingdao Haier Biomedical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,113  in Qingdao Haier Biomedical on October 9, 2024 and sell it today you would earn a total of  407.00  from holding Qingdao Haier Biomedical or generate 13.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.45%
Values	Daily Returns

Chongqing Shunbo Aluminum  vs.  Qingdao Haier Biomedical

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

5 of 100

Insignificant

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

Qingdao Haier Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chongqing Shunbo and Qingdao Haier

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

The idea behind Chongqing Shunbo Aluminum and Qingdao Haier Biomedical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.