Correlation Between Qumei Furniture and Tianneng Battery

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

Diversification Opportunities for Qumei Furniture and Tianneng Battery

0.01

Correlation Coefficient

Qumei Furniture  Tianneng Battery

Significant diversification

The 3 months correlation between Qumei and Tianneng is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and Tianneng Battery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianneng Battery 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 Tianneng Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianneng Battery has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and Tianneng Battery go up and down completely randomly.

Pair Corralation between Qumei Furniture and Tianneng Battery

Assuming the 90 days trading horizon Qumei Furniture Group is expected to under-perform the Tianneng Battery. In addition to that, Qumei Furniture is 1.23 times more volatile than Tianneng Battery Group. It trades about -0.03 of its total potential returns per unit of risk. Tianneng Battery Group is currently generating about -0.01 per unit of volatility. If you would invest  3,523  in Tianneng Battery Group on September 20, 2024 and sell it today you would lose (704.00) from holding Tianneng Battery Group or give up 19.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Qumei Furniture Group  vs.  Tianneng Battery Group

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.

Tianneng Battery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianneng Battery Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianneng Battery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Qumei Furniture and Tianneng Battery

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

The idea behind Qumei Furniture Group and Tianneng Battery Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.