Correlation Between China Glaze and Quintain Steel

Can any of the company-specific risk be diversified away by investing in both China Glaze and Quintain Steel 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 China Glaze and Quintain Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for China Glaze and Quintain Steel

0.57

Correlation Coefficient

China Glaze  Quintain Steel

Very weak diversification

The 3 months correlation between China and Quintain is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding China Glaze Co and Quintain Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quintain Steel and China Glaze 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 China Glaze Co are associated (or correlated) with Quintain Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quintain Steel has no effect on the direction of China Glaze i.e., China Glaze and Quintain Steel go up and down completely randomly.

Pair Corralation between China Glaze and Quintain Steel

Assuming the 90 days trading horizon China Glaze Co is expected to generate 3.3 times more return on investment than Quintain Steel. However, China Glaze is 3.3 times more volatile than Quintain Steel Co. It trades about 0.03 of its potential returns per unit of risk. Quintain Steel Co is currently generating about -0.39 per unit of risk. If you would invest  1,960  in China Glaze Co on September 19, 2024 and sell it today you would earn a total of  15.00  from holding China Glaze Co or generate 0.77% return on investment over 90 days.

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

China Glaze Co  vs.  Quintain Steel Co

China Glaze

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Glaze Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Glaze is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Quintain Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quintain Steel Co 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 China Glaze and Quintain Steel

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

The idea behind China Glaze Co and Quintain Steel 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.