Correlation Between ButOne Information and Qingdao Foods

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

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

Diversification Opportunities for ButOne Information and Qingdao Foods

0.59

Correlation Coefficient

ButOne Information  Qingdao Foods

Very weak diversification

The 3 months correlation between ButOne and Qingdao is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ButOne Information Corp and Qingdao Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Foods and ButOne Information 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 ButOne Information Corp are associated (or correlated) with Qingdao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Foods has no effect on the direction of ButOne Information i.e., ButOne Information and Qingdao Foods go up and down completely randomly.

Pair Corralation between ButOne Information and Qingdao Foods

Assuming the 90 days trading horizon ButOne Information Corp is expected to generate 1.29 times more return on investment than Qingdao Foods. However, ButOne Information is 1.29 times more volatile than Qingdao Foods Co. It trades about -0.02 of its potential returns per unit of risk. Qingdao Foods Co is currently generating about -0.08 per unit of risk. If you would invest  2,370  in ButOne Information Corp on December 4, 2024 and sell it today you would lose (130.00) from holding ButOne Information Corp or give up 5.49% of portfolio value over 90 days.

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

ButOne Information Corp  vs.  Qingdao Foods Co

ButOne Information Corp

Risk-Adjusted Performance

Very Weak

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

Qingdao Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qingdao Foods Co 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 ButOne Information and Qingdao Foods

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

The idea behind ButOne Information Corp and Qingdao Foods Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.