Correlation Between Orient Sec and Qingdao Foods

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

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

Diversification Opportunities for Orient Sec and Qingdao Foods

0.72

Correlation Coefficient

Orient Sec  Qingdao Foods

Poor diversification

The 3 months correlation between Orient and Qingdao is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Orient Sec Co and Qingdao Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Foods and Orient Sec 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 Orient Sec Co 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 Orient Sec i.e., Orient Sec and Qingdao Foods go up and down completely randomly.

Pair Corralation between Orient Sec and Qingdao Foods

Assuming the 90 days trading horizon Orient Sec is expected to generate 42.25 times less return on investment than Qingdao Foods. But when comparing it to its historical volatility, Orient Sec Co is 1.45 times less risky than Qingdao Foods. It trades about 0.01 of its potential returns per unit of risk. Qingdao Foods Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Qingdao Foods Co on September 21, 2024 and sell it today you would earn a total of  240.00  from holding Qingdao Foods Co or generate 20.19% return on investment over 90 days.

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

Orient Sec Co  vs.  Qingdao Foods Co

Orient Sec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Sec Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orient Sec sustained solid returns over the last few months and may actually be approaching a breakup point.

Qingdao Foods

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Orient Sec and Qingdao Foods

The main advantage of trading using opposite Orient Sec and Qingdao Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Sec 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 Orient Sec Co 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..