Correlation Between Qilu Bank and Ningbo Thermal

Can any of the company-specific risk be diversified away by investing in both Qilu Bank and Ningbo Thermal 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 Ningbo Thermal 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 Ningbo Thermal Power, you can compare the effects of market volatilities on Qilu Bank and Ningbo Thermal 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 Ningbo Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qilu Bank and Ningbo Thermal.

Diversification Opportunities for Qilu Bank and Ningbo Thermal

0.02

Correlation Coefficient

Qilu Bank  Ningbo Thermal

Significant diversification

The 3 months correlation between Qilu and Ningbo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Qilu Bank Co and Ningbo Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Thermal Power 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 Ningbo Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Thermal Power has no effect on the direction of Qilu Bank i.e., Qilu Bank and Ningbo Thermal go up and down completely randomly.

Pair Corralation between Qilu Bank and Ningbo Thermal

Assuming the 90 days trading horizon Qilu Bank Co is expected to generate 0.87 times more return on investment than Ningbo Thermal. However, Qilu Bank Co is 1.16 times less risky than Ningbo Thermal. It trades about 0.09 of its potential returns per unit of risk. Ningbo Thermal Power is currently generating about 0.01 per unit of risk. If you would invest  373.00  in Qilu Bank Co on October 6, 2024 and sell it today you would earn a total of  167.00  from holding Qilu Bank Co or generate 44.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.58%
Values	Daily Returns

Qilu Bank Co  vs.  Ningbo Thermal Power

Qilu Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qilu Bank Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qilu Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ningbo Thermal Power

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Qilu Bank and Ningbo Thermal

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

The idea behind Qilu Bank Co and Ningbo Thermal Power 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.