Correlation Between Qinghaihuading Industrial and HUAQIN TECHNOLOGY

Can any of the company-specific risk be diversified away by investing in both Qinghaihuading Industrial and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY LTD, you can compare the effects of market volatilities on Qinghaihuading Industrial and HUAQIN TECHNOLOGY 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 HUAQIN TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qinghaihuading Industrial and HUAQIN TECHNOLOGY.

Diversification Opportunities for Qinghaihuading Industrial and HUAQIN TECHNOLOGY

-0.42

Correlation Coefficient

Qinghaihuading Industrial  HUAQIN TECHNOLOGY

Very good diversification

The 3 months correlation between Qinghaihuading and HUAQIN is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Qinghaihuading Industrial Co and HUAQIN TECHNOLOGY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUAQIN TECHNOLOGY LTD 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 HUAQIN TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUAQIN TECHNOLOGY LTD has no effect on the direction of Qinghaihuading Industrial i.e., Qinghaihuading Industrial and HUAQIN TECHNOLOGY go up and down completely randomly.

Pair Corralation between Qinghaihuading Industrial and HUAQIN TECHNOLOGY

Assuming the 90 days trading horizon Qinghaihuading Industrial Co is expected to under-perform the HUAQIN TECHNOLOGY. In addition to that, Qinghaihuading Industrial is 1.28 times more volatile than HUAQIN TECHNOLOGY LTD. It trades about -0.07 of its total potential returns per unit of risk. HUAQIN TECHNOLOGY LTD is currently generating about 0.14 per unit of volatility. If you would invest  5,458  in HUAQIN TECHNOLOGY LTD on October 10, 2024 and sell it today you would earn a total of  1,617  from holding HUAQIN TECHNOLOGY LTD or generate 29.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Qinghaihuading Industrial Co  vs.  HUAQIN TECHNOLOGY LTD

Qinghaihuading Industrial

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HUAQIN TECHNOLOGY LTD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUAQIN TECHNOLOGY LTD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUAQIN TECHNOLOGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qinghaihuading Industrial and HUAQIN TECHNOLOGY

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

The idea behind Qinghaihuading Industrial Co and HUAQIN TECHNOLOGY LTD 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.