Correlation Between WuXi AppTec and Qinghai Salt

Can any of the company-specific risk be diversified away by investing in both WuXi AppTec and Qinghai Salt 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 WuXi AppTec and Qinghai Salt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WuXi AppTec Co and Qinghai Salt Lake, you can compare the effects of market volatilities on WuXi AppTec and Qinghai Salt 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 WuXi AppTec with a short position of Qinghai Salt. Check out your portfolio center. Please also check ongoing floating volatility patterns of WuXi AppTec and Qinghai Salt.

Diversification Opportunities for WuXi AppTec and Qinghai Salt

0.01

Correlation Coefficient

WuXi AppTec  Qinghai Salt

Significant diversification

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

Pair Corralation between WuXi AppTec and Qinghai Salt

If you would invest (100.00) in WuXi AppTec Co on October 12, 2024 and sell it today you would earn a total of  100.00  from holding WuXi AppTec Co or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

WuXi AppTec Co  vs.  Qinghai Salt Lake

WuXi AppTec

Risk-Adjusted Performance

0 of 100

Weak

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

Qinghai Salt Lake

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WuXi AppTec and Qinghai Salt

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

The idea behind WuXi AppTec Co and Qinghai Salt Lake 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.