Correlation Between Qinghaihuading Industrial and Sichuan Yahua

Can any of the company-specific risk be diversified away by investing in both Qinghaihuading Industrial and Sichuan Yahua 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 Qinghaihuading Industrial and Sichuan Yahua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qinghaihuading Industrial Co and Sichuan Yahua Industrial, you can compare the effects of market volatilities on Qinghaihuading Industrial and Sichuan Yahua 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 Qinghaihuading Industrial with a short position of Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qinghaihuading Industrial and Sichuan Yahua.

Diversification Opportunities for Qinghaihuading Industrial and Sichuan Yahua

-0.37

Correlation Coefficient

Qinghaihuading Industrial  Sichuan Yahua

Very good diversification

The 3 months correlation between Qinghaihuading and Sichuan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Qinghaihuading Industrial Co and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial and Qinghaihuading Industrial 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 Qinghaihuading Industrial Co are associated (or correlated) with Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of Qinghaihuading Industrial i.e., Qinghaihuading Industrial and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Qinghaihuading Industrial and Sichuan Yahua

Assuming the 90 days trading horizon Qinghaihuading Industrial Co is expected to under-perform the Sichuan Yahua. In addition to that, Qinghaihuading Industrial is 1.96 times more volatile than Sichuan Yahua Industrial. It trades about -0.09 of its total potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.06 per unit of volatility. If you would invest  1,197  in Sichuan Yahua Industrial on December 28, 2024 and sell it today you would earn a total of  85.00  from holding Sichuan Yahua Industrial or generate 7.1% return on investment over 90 days.

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

Qinghaihuading Industrial Co  vs.  Sichuan Yahua Industrial

Qinghaihuading Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qinghaihuading Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sichuan Yahua Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Qinghaihuading Industrial and Sichuan Yahua

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

The idea behind Qinghaihuading Industrial Co and Sichuan Yahua Industrial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.