Correlation Between Hubei Forbon and Qumei Furniture

Can any of the company-specific risk be diversified away by investing in both Hubei Forbon and Qumei Furniture 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 Hubei Forbon and Qumei Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Forbon Technology and Qumei Furniture Group, you can compare the effects of market volatilities on Hubei Forbon and Qumei Furniture 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 Hubei Forbon with a short position of Qumei Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Forbon and Qumei Furniture.

Diversification Opportunities for Hubei Forbon and Qumei Furniture

0.83

Correlation Coefficient

Hubei Forbon  Qumei Furniture

Very poor diversification

The 3 months correlation between Hubei and Qumei is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Forbon Technology and Qumei Furniture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qumei Furniture Group and Hubei Forbon 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 Hubei Forbon Technology are associated (or correlated) with Qumei Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qumei Furniture Group has no effect on the direction of Hubei Forbon i.e., Hubei Forbon and Qumei Furniture go up and down completely randomly.

Pair Corralation between Hubei Forbon and Qumei Furniture

Assuming the 90 days trading horizon Hubei Forbon Technology is expected to generate 0.95 times more return on investment than Qumei Furniture. However, Hubei Forbon Technology is 1.06 times less risky than Qumei Furniture. It trades about 0.07 of its potential returns per unit of risk. Qumei Furniture Group is currently generating about -0.17 per unit of risk. If you would invest  802.00  in Hubei Forbon Technology on October 26, 2024 and sell it today you would earn a total of  26.00  from holding Hubei Forbon Technology or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Hubei Forbon Technology  vs.  Qumei Furniture Group

Hubei Forbon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hubei Forbon Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hubei Forbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qumei Furniture Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qumei Furniture 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.

Pair Trading with Hubei Forbon and Qumei Furniture

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

The idea behind Hubei Forbon Technology and Qumei Furniture Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.