Correlation Between Qumei Furniture and Orinko Advanced

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

Diversification Opportunities for Qumei Furniture and Orinko Advanced

0.02

Correlation Coefficient

Qumei Furniture  Orinko Advanced

Significant diversification

The 3 months correlation between Qumei and Orinko is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and Orinko Advanced Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinko Advanced Plastics 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 Orinko Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinko Advanced Plastics has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and Orinko Advanced go up and down completely randomly.

Pair Corralation between Qumei Furniture and Orinko Advanced

Assuming the 90 days trading horizon Qumei Furniture is expected to generate 6.23 times less return on investment than Orinko Advanced. But when comparing it to its historical volatility, Qumei Furniture Group is 1.69 times less risky than Orinko Advanced. It trades about 0.07 of its potential returns per unit of risk. Orinko Advanced Plastics is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,072  in Orinko Advanced Plastics on December 2, 2024 and sell it today you would earn a total of  261.00  from holding Orinko Advanced Plastics or generate 24.35% return on investment over 90 days.

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

Qumei Furniture Group  vs.  Orinko Advanced Plastics

Qumei Furniture Group

Risk-Adjusted Performance

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 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.

Orinko Advanced Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orinko Advanced Plastics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orinko Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qumei Furniture and Orinko Advanced

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

The idea behind Qumei Furniture Group and Orinko Advanced Plastics 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 Commodity Directory module to find actively traded commodities issued by global exchanges.