Correlation Between Qumei Furniture and China Mobile

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

Diversification Opportunities for Qumei Furniture and China Mobile

-0.13

Correlation Coefficient

Qumei Furniture  China Mobile

Good diversification

The 3 months correlation between Qumei and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and China Mobile Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile Limited 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 Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile Limited has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and China Mobile go up and down completely randomly.

Pair Corralation between Qumei Furniture and China Mobile

Assuming the 90 days trading horizon Qumei Furniture Group is expected to under-perform the China Mobile. In addition to that, Qumei Furniture is 1.66 times more volatile than China Mobile Limited. It trades about -0.06 of its total potential returns per unit of risk. China Mobile Limited is currently generating about 0.05 per unit of volatility. If you would invest  7,507  in China Mobile Limited on October 24, 2024 and sell it today you would earn a total of  3,213  from holding China Mobile Limited or generate 42.8% return on investment over 90 days.

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

Qumei Furniture Group  vs.  China Mobile Limited

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 Mobile Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Mobile 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 Mobile

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

The idea behind Qumei Furniture Group and China Mobile Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.