Correlation Between Reward Wool and QST International

Can any of the company-specific risk be diversified away by investing in both Reward Wool and QST International 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 Reward Wool and QST International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reward Wool Industry and QST International, you can compare the effects of market volatilities on Reward Wool and QST International 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 Reward Wool with a short position of QST International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reward Wool and QST International.

Diversification Opportunities for Reward Wool and QST International

0.89

Correlation Coefficient

Reward Wool  QST International

Very poor diversification

The 3 months correlation between Reward and QST is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and QST International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QST International and Reward Wool 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 Reward Wool Industry are associated (or correlated) with QST International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QST International has no effect on the direction of Reward Wool i.e., Reward Wool and QST International go up and down completely randomly.

Pair Corralation between Reward Wool and QST International

Assuming the 90 days trading horizon Reward Wool Industry is expected to under-perform the QST International. In addition to that, Reward Wool is 1.52 times more volatile than QST International. It trades about -0.17 of its total potential returns per unit of risk. QST International is currently generating about -0.2 per unit of volatility. If you would invest  6,950  in QST International on September 15, 2024 and sell it today you would lose (710.00) from holding QST International or give up 10.22% of portfolio value over 90 days.

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

Reward Wool Industry  vs.  QST International

Reward Wool Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reward Wool Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

QST International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QST International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Reward Wool and QST International

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

The idea behind Reward Wool Industry and QST International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.