Correlation Between Chengdu B and Qumei Furniture

Can any of the company-specific risk be diversified away by investing in both Chengdu B and Qumei Furniture 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 Chengdu B and Qumei Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu B ray Media and Qumei Furniture Group, you can compare the effects of market volatilities on Chengdu B and Qumei Furniture 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 Chengdu B with a short position of Qumei Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu B and Qumei Furniture.

Diversification Opportunities for Chengdu B and Qumei Furniture

0.93

Correlation Coefficient

Chengdu B  Qumei Furniture

Almost no diversification

The 3 months correlation between Chengdu and Qumei is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media and Qumei Furniture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qumei Furniture Group and Chengdu B 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 Chengdu B ray Media are associated (or correlated) with Qumei Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qumei Furniture Group has no effect on the direction of Chengdu B i.e., Chengdu B and Qumei Furniture go up and down completely randomly.

Pair Corralation between Chengdu B and Qumei Furniture

Assuming the 90 days trading horizon Chengdu B ray Media is expected to generate 0.87 times more return on investment than Qumei Furniture. However, Chengdu B ray Media is 1.15 times less risky than Qumei Furniture. It trades about 0.19 of its potential returns per unit of risk. Qumei Furniture Group is currently generating about 0.16 per unit of risk. If you would invest  365.00  in Chengdu B ray Media on September 5, 2024 and sell it today you would earn a total of  139.00  from holding Chengdu B ray Media or generate 38.08% return on investment over 90 days.

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

Chengdu B ray Media  vs.  Qumei Furniture Group

Chengdu B ray

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu B ray Media are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu B sustained solid returns over the last few months and may actually be approaching a breakup point.

Qumei Furniture Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qumei Furniture Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qumei Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengdu B and Qumei Furniture

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

The idea behind Chengdu B ray Media and Qumei Furniture Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.