Correlation Between Shandong Rike and Quectel Wireless

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

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

Diversification Opportunities for Shandong Rike and Quectel Wireless

-0.02

Correlation Coefficient

Shandong Rike  Quectel Wireless

Good diversification

The 3 months correlation between Shandong and Quectel is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Rike Chemical 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 Shandong Rike 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 Shandong Rike Chemical 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 Shandong Rike i.e., Shandong Rike and Quectel Wireless go up and down completely randomly.

Pair Corralation between Shandong Rike and Quectel Wireless

Assuming the 90 days trading horizon Shandong Rike is expected to generate 7.67 times less return on investment than Quectel Wireless. But when comparing it to its historical volatility, Shandong Rike Chemical is 1.02 times less risky than Quectel Wireless. It trades about 0.04 of its potential returns per unit of risk. Quectel Wireless Solutions is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  6,490  in Quectel Wireless Solutions on October 22, 2024 and sell it today you would earn a total of  1,550  from holding Quectel Wireless Solutions or generate 23.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Shandong Rike Chemical  vs.  Quectel Wireless Solutions

Shandong Rike Chemical

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Rike Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Rike may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Quectel Wireless Sol

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quectel Wireless Solutions are ranked lower than 14 (%) 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 Shandong Rike and Quectel Wireless

The main advantage of trading using opposite Shandong Rike and Quectel Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Rike 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 Shandong Rike Chemical 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.