Correlation Between Qianhe CondimentFood and Suofeiya Home

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

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

Diversification Opportunities for Qianhe CondimentFood and Suofeiya Home

0.75

Correlation Coefficient

Qianhe CondimentFood  Suofeiya Home

Poor diversification

The 3 months correlation between Qianhe and Suofeiya is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Qianhe CondimentFood Co and Suofeiya Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suofeiya Home Collection and Qianhe CondimentFood 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 Qianhe CondimentFood Co are associated (or correlated) with Suofeiya Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suofeiya Home Collection has no effect on the direction of Qianhe CondimentFood i.e., Qianhe CondimentFood and Suofeiya Home go up and down completely randomly.

Pair Corralation between Qianhe CondimentFood and Suofeiya Home

Assuming the 90 days trading horizon Qianhe CondimentFood Co is expected to under-perform the Suofeiya Home. But the stock apears to be less risky and, when comparing its historical volatility, Qianhe CondimentFood Co is 1.3 times less risky than Suofeiya Home. The stock trades about -0.07 of its potential returns per unit of risk. The Suofeiya Home Collection is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,645  in Suofeiya Home Collection on October 25, 2024 and sell it today you would lose (89.00) from holding Suofeiya Home Collection or give up 5.41% of portfolio value over 90 days.

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

Qianhe CondimentFood Co  vs.  Suofeiya Home Collection

Qianhe CondimentFood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qianhe CondimentFood Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Suofeiya Home Collection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suofeiya Home Collection 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 Qianhe CondimentFood and Suofeiya Home

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

The idea behind Qianhe CondimentFood Co and Suofeiya Home Collection 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.