Correlation Between Quectel Wireless and Tongyu Communication

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Can any of the company-specific risk be diversified away by investing in both Quectel Wireless and Tongyu Communication 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 Quectel Wireless and Tongyu Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quectel Wireless Solutions and Tongyu Communication, you can compare the effects of market volatilities on Quectel Wireless and Tongyu Communication 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 Quectel Wireless with a short position of Tongyu Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quectel Wireless and Tongyu Communication.

Diversification Opportunities for Quectel Wireless and Tongyu Communication

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Quectel and Tongyu is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Quectel Wireless Solutions and Tongyu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyu Communication and Quectel Wireless 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 Quectel Wireless Solutions are associated (or correlated) with Tongyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyu Communication has no effect on the direction of Quectel Wireless i.e., Quectel Wireless and Tongyu Communication go up and down completely randomly.

Pair Corralation between Quectel Wireless and Tongyu Communication

Assuming the 90 days trading horizon Quectel Wireless Solutions is expected to generate 2.14 times more return on investment than Tongyu Communication. However, Quectel Wireless is 2.14 times more volatile than Tongyu Communication. It trades about 0.23 of its potential returns per unit of risk. Tongyu Communication is currently generating about -0.32 per unit of risk. If you would invest  5,127  in Quectel Wireless Solutions on September 22, 2024 and sell it today you would earn a total of  1,210  from holding Quectel Wireless Solutions or generate 23.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Quectel Wireless Solutions  vs.  Tongyu Communication

 Performance 
       Timeline  
Quectel Wireless Sol 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Quectel Wireless Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Quectel Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.
Tongyu Communication 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tongyu Communication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongyu Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Quectel Wireless and Tongyu Communication Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Quectel Wireless and Tongyu Communication

The main advantage of trading using opposite Quectel Wireless and Tongyu Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quectel Wireless position performs unexpectedly, Tongyu Communication 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 Tongyu Communication will offset losses from the drop in Tongyu Communication's long position.
The idea behind Quectel Wireless Solutions and Tongyu Communication 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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