Correlation Between Qilu Bank and Rongsheng Petrochemical

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

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

Diversification Opportunities for Qilu Bank and Rongsheng Petrochemical

0.01

Correlation Coefficient

Qilu Bank  Rongsheng Petrochemical

Significant diversification

The 3 months correlation between Qilu and Rongsheng is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Qilu Bank Co and Rongsheng Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongsheng Petrochemical and Qilu Bank 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 Qilu Bank Co are associated (or correlated) with Rongsheng Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongsheng Petrochemical has no effect on the direction of Qilu Bank i.e., Qilu Bank and Rongsheng Petrochemical go up and down completely randomly.

Pair Corralation between Qilu Bank and Rongsheng Petrochemical

Assuming the 90 days trading horizon Qilu Bank Co is expected to generate 1.06 times more return on investment than Rongsheng Petrochemical. However, Qilu Bank is 1.06 times more volatile than Rongsheng Petrochemical Co. It trades about 0.13 of its potential returns per unit of risk. Rongsheng Petrochemical Co is currently generating about 0.04 per unit of risk. If you would invest  456.00  in Qilu Bank Co on October 3, 2024 and sell it today you would earn a total of  103.00  from holding Qilu Bank Co or generate 22.59% return on investment over 90 days.

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

Qilu Bank Co  vs.  Rongsheng Petrochemical Co

Qilu Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qilu Bank Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qilu Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rongsheng Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongsheng Petrochemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Qilu Bank and Rongsheng Petrochemical

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

The idea behind Qilu Bank Co and Rongsheng Petrochemical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.