Correlation Between Qingdao Citymedia and Huasi Agricultural

Can any of the company-specific risk be diversified away by investing in both Qingdao Citymedia and Huasi Agricultural 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 Qingdao Citymedia and Huasi Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qingdao Citymedia Co and Huasi Agricultural Development, you can compare the effects of market volatilities on Qingdao Citymedia and Huasi Agricultural 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 Qingdao Citymedia with a short position of Huasi Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Citymedia and Huasi Agricultural.

Diversification Opportunities for Qingdao Citymedia and Huasi Agricultural

0.86

Correlation Coefficient

Qingdao Citymedia  Huasi Agricultural

Very poor diversification

The 3 months correlation between Qingdao and Huasi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Citymedia Co and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural and Qingdao Citymedia 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 Qingdao Citymedia Co are associated (or correlated) with Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Qingdao Citymedia i.e., Qingdao Citymedia and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Qingdao Citymedia and Huasi Agricultural

Assuming the 90 days trading horizon Qingdao Citymedia Co is expected to under-perform the Huasi Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Qingdao Citymedia Co is 1.42 times less risky than Huasi Agricultural. The stock trades about -0.04 of its potential returns per unit of risk. The Huasi Agricultural Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  429.00  in Huasi Agricultural Development on November 28, 2024 and sell it today you would lose (6.00) from holding Huasi Agricultural Development or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.25%
Values	Daily Returns

Qingdao Citymedia Co  vs.  Huasi Agricultural Development

Qingdao Citymedia

Risk-Adjusted Performance

Very Weak

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

Huasi Agricultural

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Qingdao Citymedia and Huasi Agricultural

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

The idea behind Qingdao Citymedia Co and Huasi Agricultural Development 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.