Correlation Between Jinlong Machinery and Quectel Wireless

Can any of the company-specific risk be diversified away by investing in both Jinlong Machinery and Quectel Wireless 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 Jinlong Machinery and Quectel Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinlong Machinery Electronic and Quectel Wireless Solutions, you can compare the effects of market volatilities on Jinlong Machinery and Quectel Wireless 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 Jinlong Machinery with a short position of Quectel Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinlong Machinery and Quectel Wireless.

Diversification Opportunities for Jinlong Machinery and Quectel Wireless

-0.15

Correlation Coefficient

Jinlong Machinery  Quectel Wireless

Good diversification

The 3 months correlation between Jinlong and Quectel is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Jinlong Machinery Electronic and Quectel Wireless Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quectel Wireless Sol and Jinlong Machinery 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 Jinlong Machinery Electronic are associated (or correlated) with Quectel Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quectel Wireless Sol has no effect on the direction of Jinlong Machinery i.e., Jinlong Machinery and Quectel Wireless go up and down completely randomly.

Pair Corralation between Jinlong Machinery and Quectel Wireless

Assuming the 90 days trading horizon Jinlong Machinery is expected to generate 2.38 times less return on investment than Quectel Wireless. In addition to that, Jinlong Machinery is 1.25 times more volatile than Quectel Wireless Solutions. It trades about 0.05 of its total potential returns per unit of risk. Quectel Wireless Solutions is currently generating about 0.14 per unit of volatility. If you would invest  4,872  in Quectel Wireless Solutions on October 11, 2024 and sell it today you would earn a total of  1,710  from holding Quectel Wireless Solutions or generate 35.1% return on investment over 90 days.

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

Jinlong Machinery Electronic  vs.  Quectel Wireless Solutions

Jinlong Machinery

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jinlong Machinery Electronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinlong Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Quectel Wireless Sol

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quectel Wireless Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Quectel Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jinlong Machinery and Quectel Wireless

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

The idea behind Jinlong Machinery Electronic and Quectel Wireless Solutions 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.