Correlation Between Qijing Machinery and Shenzhen Glory

Can any of the company-specific risk be diversified away by investing in both Qijing Machinery and Shenzhen Glory 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 Qijing Machinery and Shenzhen Glory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qijing Machinery and Shenzhen Glory Medical, you can compare the effects of market volatilities on Qijing Machinery and Shenzhen Glory 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 Qijing Machinery with a short position of Shenzhen Glory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qijing Machinery and Shenzhen Glory.

Diversification Opportunities for Qijing Machinery and Shenzhen Glory

0.54

Correlation Coefficient

Qijing Machinery  Shenzhen Glory

Very weak diversification

The 3 months correlation between Qijing and Shenzhen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Qijing Machinery and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical and Qijing Machinery 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 Qijing Machinery are associated (or correlated) with Shenzhen Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Qijing Machinery i.e., Qijing Machinery and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Qijing Machinery and Shenzhen Glory

Assuming the 90 days trading horizon Qijing Machinery is expected to generate 1.08 times more return on investment than Shenzhen Glory. However, Qijing Machinery is 1.08 times more volatile than Shenzhen Glory Medical. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Glory Medical is currently generating about -0.05 per unit of risk. If you would invest  1,420  in Qijing Machinery on October 26, 2024 and sell it today you would lose (23.00) from holding Qijing Machinery or give up 1.62% of portfolio value over 90 days.

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

Qijing Machinery  vs.  Shenzhen Glory Medical

Qijing Machinery

Risk-Adjusted Performance

0 of 100

Insignificant

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

Shenzhen Glory Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Glory Medical 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.

Pair Trading with Qijing Machinery and Shenzhen Glory

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

The idea behind Qijing Machinery and Shenzhen Glory Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.