Correlation Between Postal Savings and Qumei Furniture

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

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

Diversification Opportunities for Postal Savings and Qumei Furniture

0.04

Correlation Coefficient

Postal Savings  Qumei Furniture

Significant diversification

The 3 months correlation between Postal and Qumei is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Postal Savings Bank 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 Postal Savings 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 Postal Savings Bank 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 Postal Savings i.e., Postal Savings and Qumei Furniture go up and down completely randomly.

Pair Corralation between Postal Savings and Qumei Furniture

Assuming the 90 days trading horizon Postal Savings Bank is expected to under-perform the Qumei Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Postal Savings Bank is 2.63 times less risky than Qumei Furniture. The stock trades about -0.06 of its potential returns per unit of risk. The Qumei Furniture Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  266.00  in Qumei Furniture Group on October 23, 2024 and sell it today you would earn a total of  8.00  from holding Qumei Furniture Group or generate 3.01% return on investment over 90 days.

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

Postal Savings Bank  vs.  Qumei Furniture Group

Postal Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Qumei Furniture Group

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Postal Savings and Qumei Furniture

The main advantage of trading using opposite Postal Savings and Qumei Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Savings 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 Postal Savings Bank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.