Correlation Between Qtone Education and Chengdu Xuguang

Can any of the company-specific risk be diversified away by investing in both Qtone Education and Chengdu Xuguang 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 Qtone Education and Chengdu Xuguang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qtone Education Group and Chengdu Xuguang Electronics, you can compare the effects of market volatilities on Qtone Education and Chengdu Xuguang 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 Qtone Education with a short position of Chengdu Xuguang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qtone Education and Chengdu Xuguang.

Diversification Opportunities for Qtone Education and Chengdu Xuguang

0.63

Correlation Coefficient

Qtone Education  Chengdu Xuguang

Poor diversification

The 3 months correlation between Qtone and Chengdu is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Qtone Education Group and Chengdu Xuguang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xuguang Elec and Qtone Education 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 Qtone Education Group are associated (or correlated) with Chengdu Xuguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xuguang Elec has no effect on the direction of Qtone Education i.e., Qtone Education and Chengdu Xuguang go up and down completely randomly.

Pair Corralation between Qtone Education and Chengdu Xuguang

Assuming the 90 days trading horizon Qtone Education Group is expected to generate 1.16 times more return on investment than Chengdu Xuguang. However, Qtone Education is 1.16 times more volatile than Chengdu Xuguang Electronics. It trades about 0.02 of its potential returns per unit of risk. Chengdu Xuguang Electronics is currently generating about 0.0 per unit of risk. If you would invest  518.00  in Qtone Education Group on October 9, 2024 and sell it today you would lose (12.00) from holding Qtone Education Group or give up 2.32% of portfolio value over 90 days.

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

Qtone Education Group  vs.  Chengdu Xuguang Electronics

Qtone Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qtone Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Chengdu Xuguang Elec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xuguang Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Xuguang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Qtone Education and Chengdu Xuguang

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

The idea behind Qtone Education Group and Chengdu Xuguang Electronics 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.