Correlation Between Nanjing Medlander and Qumei Furniture

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

By analyzing existing cross correlation between Nanjing Medlander Medical and Qumei Furniture Group, you can compare the effects of market volatilities on Nanjing Medlander and Qumei Furniture 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 Nanjing Medlander with a short position of Qumei Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Medlander and Qumei Furniture.

Diversification Opportunities for Nanjing Medlander and Qumei Furniture

0.79

Correlation Coefficient

Nanjing Medlander  Qumei Furniture

Poor diversification

The 3 months correlation between Nanjing and Qumei is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Medlander Medical and Qumei Furniture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qumei Furniture Group and Nanjing Medlander 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 Nanjing Medlander Medical are associated (or correlated) with Qumei Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qumei Furniture Group has no effect on the direction of Nanjing Medlander i.e., Nanjing Medlander and Qumei Furniture go up and down completely randomly.

Pair Corralation between Nanjing Medlander and Qumei Furniture

Assuming the 90 days trading horizon Nanjing Medlander Medical is expected to under-perform the Qumei Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Nanjing Medlander Medical is 1.61 times less risky than Qumei Furniture. The stock trades about -0.06 of its potential returns per unit of risk. The Qumei Furniture Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Qumei Furniture Group on September 22, 2024 and sell it today you would earn a total of  18.00  from holding Qumei Furniture Group or generate 5.81% return on investment over 90 days.

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

Nanjing Medlander Medical  vs.  Qumei Furniture Group

Nanjing Medlander Medical

Risk-Adjusted Performance

10 of 100

OK

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

Qumei Furniture Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qumei Furniture Group are ranked lower than 15 (%) 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.

Pair Trading with Nanjing Medlander and Qumei Furniture

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

The idea behind Nanjing Medlander Medical and Qumei Furniture 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.