Correlation Between Qijing Machinery and New China

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

By analyzing existing cross correlation between Qijing Machinery and New China Life, you can compare the effects of market volatilities on Qijing Machinery and New China 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 New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qijing Machinery and New China.

Diversification Opportunities for Qijing Machinery and New China

0.58

Correlation Coefficient

Qijing Machinery  New China

Very weak diversification

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

Pair Corralation between Qijing Machinery and New China

Assuming the 90 days trading horizon Qijing Machinery is expected to generate 1.87 times more return on investment than New China. However, Qijing Machinery is 1.87 times more volatile than New China Life. It trades about 0.26 of its potential returns per unit of risk. New China Life is currently generating about 0.02 per unit of risk. If you would invest  1,303  in Qijing Machinery on December 24, 2024 and sell it today you would earn a total of  1,209  from holding Qijing Machinery or generate 92.79% return on investment over 90 days.

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

Qijing Machinery  vs.  New China Life

Qijing Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

New China Life

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Qijing Machinery and New China

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

The idea behind Qijing Machinery and New China Life 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.