Correlation Between Zhangjiagang Freetrade and Qijing Machinery

Can any of the company-specific risk be diversified away by investing in both Zhangjiagang Freetrade and Qijing Machinery 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 Zhangjiagang Freetrade and Qijing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhangjiagang Freetrade Science and Qijing Machinery, you can compare the effects of market volatilities on Zhangjiagang Freetrade and Qijing Machinery 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 Zhangjiagang Freetrade with a short position of Qijing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Qijing Machinery.

Diversification Opportunities for Zhangjiagang Freetrade and Qijing Machinery

0.7

Correlation Coefficient

Zhangjiagang Freetrade  Qijing Machinery

Poor diversification

The 3 months correlation between Zhangjiagang and Qijing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science are associated (or correlated) with Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Qijing Machinery go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Qijing Machinery

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to under-perform the Qijing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Zhangjiagang Freetrade Science is 1.27 times less risky than Qijing Machinery. The stock trades about -0.02 of its potential returns per unit of risk. The Qijing Machinery is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,522  in Qijing Machinery on October 7, 2024 and sell it today you would lose (234.00) from holding Qijing Machinery or give up 15.37% of portfolio value over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Qijing Machinery

Zhangjiagang Freetrade

Risk-Adjusted Performance

0 of 100

Very Weak

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

Qijing Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Zhangjiagang Freetrade and Qijing Machinery

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

The idea behind Zhangjiagang Freetrade Science and Qijing Machinery 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 Transaction History module to view history of all your transactions and understand their impact on performance.