Correlation Between Qumei Furniture and China Enterprise

Can any of the company-specific risk be diversified away by investing in both Qumei Furniture and China Enterprise 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 China Enterprise 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 China Enterprise Co, you can compare the effects of market volatilities on Qumei Furniture and China Enterprise 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 China Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qumei Furniture and China Enterprise.

Diversification Opportunities for Qumei Furniture and China Enterprise

0.61

Correlation Coefficient

Qumei Furniture  China Enterprise

Poor diversification

The 3 months correlation between Qumei and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise 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 China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and China Enterprise go up and down completely randomly.

Pair Corralation between Qumei Furniture and China Enterprise

Assuming the 90 days trading horizon Qumei Furniture Group is expected to under-perform the China Enterprise. In addition to that, Qumei Furniture is 1.23 times more volatile than China Enterprise Co. It trades about -0.03 of its total potential returns per unit of risk. China Enterprise Co is currently generating about 0.0 per unit of volatility. If you would invest  286.00  in China Enterprise Co on October 9, 2024 and sell it today you would lose (16.00) from holding China Enterprise Co or give up 5.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.39%
Values	Daily Returns

Qumei Furniture Group  vs.  China Enterprise Co

Qumei Furniture Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Qumei Furniture and China Enterprise

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

The idea behind Qumei Furniture Group and China Enterprise Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.