Correlation Between Qumei Furniture and Impulse Qingdao

Can any of the company-specific risk be diversified away by investing in both Qumei Furniture and Impulse Qingdao 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 Qumei Furniture and Impulse Qingdao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qumei Furniture Group and Impulse Qingdao Health, you can compare the effects of market volatilities on Qumei Furniture and Impulse Qingdao 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 Qumei Furniture with a short position of Impulse Qingdao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qumei Furniture and Impulse Qingdao.

Diversification Opportunities for Qumei Furniture and Impulse Qingdao

0.9

Correlation Coefficient

Qumei Furniture  Impulse Qingdao

Almost no diversification

The 3 months correlation between Qumei and Impulse is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and Impulse Qingdao Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impulse Qingdao Health and Qumei Furniture 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 Qumei Furniture Group are associated (or correlated) with Impulse Qingdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impulse Qingdao Health has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and Impulse Qingdao go up and down completely randomly.

Pair Corralation between Qumei Furniture and Impulse Qingdao

Assuming the 90 days trading horizon Qumei Furniture Group is expected to under-perform the Impulse Qingdao. In addition to that, Qumei Furniture is 1.02 times more volatile than Impulse Qingdao Health. It trades about -0.03 of its total potential returns per unit of risk. Impulse Qingdao Health is currently generating about 0.06 per unit of volatility. If you would invest  1,240  in Impulse Qingdao Health on September 20, 2024 and sell it today you would earn a total of  1,077  from holding Impulse Qingdao Health or generate 86.85% return on investment over 90 days.

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

Qumei Furniture Group  vs.  Impulse Qingdao Health

Qumei Furniture Group

Risk-Adjusted Performance

16 of 100

Solid

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

Impulse Qingdao Health

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Impulse Qingdao Health are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Impulse Qingdao sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qumei Furniture and Impulse Qingdao

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

The idea behind Qumei Furniture Group and Impulse Qingdao Health 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.