Correlation Between Qualipoly Chemical and Li Kang

Can any of the company-specific risk be diversified away by investing in both Qualipoly Chemical and Li Kang 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 Qualipoly Chemical and Li Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qualipoly Chemical Corp and Li Kang Biomedical, you can compare the effects of market volatilities on Qualipoly Chemical and Li Kang 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 Qualipoly Chemical with a short position of Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qualipoly Chemical and Li Kang.

Diversification Opportunities for Qualipoly Chemical and Li Kang

0.73

Correlation Coefficient

Qualipoly Chemical  Li Kang

Poor diversification

The 3 months correlation between Qualipoly and 6242 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Qualipoly Chemical Corp and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical and Qualipoly Chemical 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 Qualipoly Chemical Corp are associated (or correlated) with Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of Qualipoly Chemical i.e., Qualipoly Chemical and Li Kang go up and down completely randomly.

Pair Corralation between Qualipoly Chemical and Li Kang

Assuming the 90 days trading horizon Qualipoly Chemical Corp is expected to generate 1.97 times more return on investment than Li Kang. However, Qualipoly Chemical is 1.97 times more volatile than Li Kang Biomedical. It trades about 0.17 of its potential returns per unit of risk. Li Kang Biomedical is currently generating about 0.04 per unit of risk. If you would invest  4,640  in Qualipoly Chemical Corp on December 31, 2024 and sell it today you would earn a total of  1,640  from holding Qualipoly Chemical Corp or generate 35.34% return on investment over 90 days.

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

Qualipoly Chemical Corp  vs.  Li Kang Biomedical

Qualipoly Chemical Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qualipoly Chemical Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Qualipoly Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Li Kang Biomedical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Kang Biomedical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Li Kang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Qualipoly Chemical and Li Kang

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

The idea behind Qualipoly Chemical Corp and Li Kang Biomedical 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.