Correlation Between Ligao Foods and Qilu Bank

Can any of the company-specific risk be diversified away by investing in both Ligao Foods and Qilu Bank 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 Ligao Foods and Qilu Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ligao Foods CoLtd and Qilu Bank Co, you can compare the effects of market volatilities on Ligao Foods and Qilu Bank 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 Ligao Foods with a short position of Qilu Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ligao Foods and Qilu Bank.

Diversification Opportunities for Ligao Foods and Qilu Bank

0.85

Correlation Coefficient

Ligao Foods  Qilu Bank

Very poor diversification

The 3 months correlation between Ligao and Qilu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ligao Foods CoLtd and Qilu Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qilu Bank and Ligao Foods 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 Ligao Foods CoLtd are associated (or correlated) with Qilu Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qilu Bank has no effect on the direction of Ligao Foods i.e., Ligao Foods and Qilu Bank go up and down completely randomly.

Pair Corralation between Ligao Foods and Qilu Bank

Assuming the 90 days trading horizon Ligao Foods CoLtd is expected to generate 1.99 times more return on investment than Qilu Bank. However, Ligao Foods is 1.99 times more volatile than Qilu Bank Co. It trades about 0.23 of its potential returns per unit of risk. Qilu Bank Co is currently generating about 0.18 per unit of risk. If you would invest  2,482  in Ligao Foods CoLtd on September 12, 2024 and sell it today you would earn a total of  1,788  from holding Ligao Foods CoLtd or generate 72.04% return on investment over 90 days.

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

Ligao Foods CoLtd  vs.  Qilu Bank Co

Ligao Foods CoLtd

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Qilu Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qilu Bank Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qilu Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ligao Foods and Qilu Bank

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

The idea behind Ligao Foods CoLtd and Qilu Bank 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.