Correlation Between Industrial Securities and Qinghaihuading Industrial

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

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

Diversification Opportunities for Industrial Securities and Qinghaihuading Industrial

0.87

Correlation Coefficient

Industrial Securities  Qinghaihuading Industrial

Very poor diversification

The 3 months correlation between Industrial and Qinghaihuading is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Securities Co and Qinghaihuading Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghaihuading Industrial and Industrial Securities 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 Industrial Securities Co are associated (or correlated) with Qinghaihuading Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghaihuading Industrial has no effect on the direction of Industrial Securities i.e., Industrial Securities and Qinghaihuading Industrial go up and down completely randomly.

Pair Corralation between Industrial Securities and Qinghaihuading Industrial

Assuming the 90 days trading horizon Industrial Securities is expected to generate 1.1 times less return on investment than Qinghaihuading Industrial. But when comparing it to its historical volatility, Industrial Securities Co is 1.01 times less risky than Qinghaihuading Industrial. It trades about 0.14 of its potential returns per unit of risk. Qinghaihuading Industrial Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  342.00  in Qinghaihuading Industrial Co on September 2, 2024 and sell it today you would earn a total of  103.00  from holding Qinghaihuading Industrial Co or generate 30.12% return on investment over 90 days.

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

Industrial Securities Co  vs.  Qinghaihuading Industrial Co

Industrial Securities

Risk-Adjusted Performance

11 of 100

Good

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

Qinghaihuading Industrial

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Industrial Securities and Qinghaihuading Industrial

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

The idea behind Industrial Securities Co and Qinghaihuading Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.