Correlation Between Qingdao Citymedia and Shanghai Rendu

Can any of the company-specific risk be diversified away by investing in both Qingdao Citymedia and Shanghai Rendu 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 Shanghai Rendu 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 Shanghai Rendu Biotechnology, you can compare the effects of market volatilities on Qingdao Citymedia and Shanghai Rendu 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 Shanghai Rendu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Citymedia and Shanghai Rendu.

Diversification Opportunities for Qingdao Citymedia and Shanghai Rendu

0.79

Correlation Coefficient

Qingdao Citymedia  Shanghai Rendu

Poor diversification

The 3 months correlation between Qingdao and Shanghai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Citymedia Co and Shanghai Rendu Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rendu Biote 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 Shanghai Rendu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rendu Biote has no effect on the direction of Qingdao Citymedia i.e., Qingdao Citymedia and Shanghai Rendu go up and down completely randomly.

Pair Corralation between Qingdao Citymedia and Shanghai Rendu

Assuming the 90 days trading horizon Qingdao Citymedia Co is expected to generate 0.85 times more return on investment than Shanghai Rendu. However, Qingdao Citymedia Co is 1.17 times less risky than Shanghai Rendu. It trades about -0.04 of its potential returns per unit of risk. Shanghai Rendu Biotechnology is currently generating about -0.05 per unit of risk. If you would invest  779.00  in Qingdao Citymedia Co on November 28, 2024 and sell it today you would lose (50.00) from holding Qingdao Citymedia Co or give up 6.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Qingdao Citymedia Co  vs.  Shanghai Rendu Biotechnology

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.

Shanghai Rendu Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Rendu Biotechnology 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 Qingdao Citymedia and Shanghai Rendu

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

The idea behind Qingdao Citymedia Co and Shanghai Rendu Biotechnology 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.