Correlation Between Wonderful and Qualipoly Chemical

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

By analyzing existing cross correlation between Wonderful Hi Tech Co and Qualipoly Chemical Corp, you can compare the effects of market volatilities on Wonderful and Qualipoly Chemical 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 Wonderful with a short position of Qualipoly Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wonderful and Qualipoly Chemical.

Diversification Opportunities for Wonderful and Qualipoly Chemical

0.78

Correlation Coefficient

Wonderful  Qualipoly Chemical

Poor diversification

The 3 months correlation between Wonderful and Qualipoly is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Wonderful Hi Tech Co and Qualipoly Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualipoly Chemical Corp and Wonderful 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 Wonderful Hi Tech Co are associated (or correlated) with Qualipoly Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualipoly Chemical Corp has no effect on the direction of Wonderful i.e., Wonderful and Qualipoly Chemical go up and down completely randomly.

Pair Corralation between Wonderful and Qualipoly Chemical

Assuming the 90 days trading horizon Wonderful is expected to generate 4.94 times less return on investment than Qualipoly Chemical. But when comparing it to its historical volatility, Wonderful Hi Tech Co is 1.67 times less risky than Qualipoly Chemical. It trades about 0.08 of its potential returns per unit of risk. Qualipoly Chemical Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,475  in Qualipoly Chemical Corp on December 25, 2024 and sell it today you would earn a total of  2,315  from holding Qualipoly Chemical Corp or generate 51.73% return on investment over 90 days.

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

Wonderful Hi Tech Co  vs.  Qualipoly Chemical Corp

Wonderful Hi Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wonderful Hi Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wonderful may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Qualipoly Chemical Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qualipoly Chemical Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Qualipoly Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wonderful and Qualipoly Chemical

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

The idea behind Wonderful Hi Tech Co and Qualipoly Chemical Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.