Correlation Between Qingdao Haier and CITIC Metal

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

By analyzing existing cross correlation between Qingdao Haier Biomedical and CITIC Metal Co, you can compare the effects of market volatilities on Qingdao Haier and CITIC Metal 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 Qingdao Haier with a short position of CITIC Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Haier and CITIC Metal.

Diversification Opportunities for Qingdao Haier and CITIC Metal

-0.1

Correlation Coefficient

Qingdao Haier  CITIC Metal

Good diversification

The 3 months correlation between Qingdao and CITIC is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Haier Biomedical and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Qingdao Haier 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 Qingdao Haier Biomedical are associated (or correlated) with CITIC Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Metal has no effect on the direction of Qingdao Haier i.e., Qingdao Haier and CITIC Metal go up and down completely randomly.

Pair Corralation between Qingdao Haier and CITIC Metal

Assuming the 90 days trading horizon Qingdao Haier Biomedical is expected to generate 2.51 times more return on investment than CITIC Metal. However, Qingdao Haier is 2.51 times more volatile than CITIC Metal Co. It trades about -0.07 of its potential returns per unit of risk. CITIC Metal Co is currently generating about -0.38 per unit of risk. If you would invest  3,318  in Qingdao Haier Biomedical on October 9, 2024 and sell it today you would lose (178.00) from holding Qingdao Haier Biomedical or give up 5.36% of portfolio value over 90 days.

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

Qingdao Haier Biomedical  vs.  CITIC Metal Co

Qingdao Haier Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

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

CITIC Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Qingdao Haier and CITIC Metal

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

The idea behind Qingdao Haier Biomedical and CITIC Metal 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.