Correlation Between Qi An and Ming Yang

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

By analyzing existing cross correlation between Qi An Xin and Ming Yang Smart, you can compare the effects of market volatilities on Qi An and Ming Yang 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 Qi An with a short position of Ming Yang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qi An and Ming Yang.

Diversification Opportunities for Qi An and Ming Yang

0.7

Correlation Coefficient

Qi An  Ming Yang

Poor diversification

The 3 months correlation between 688561 and Ming is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Qi An Xin and Ming Yang Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ming Yang Smart and Qi An 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 Qi An Xin are associated (or correlated) with Ming Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ming Yang Smart has no effect on the direction of Qi An i.e., Qi An and Ming Yang go up and down completely randomly.

Pair Corralation between Qi An and Ming Yang

Assuming the 90 days trading horizon Qi An Xin is expected to under-perform the Ming Yang. But the stock apears to be less risky and, when comparing its historical volatility, Qi An Xin is 1.2 times less risky than Ming Yang. The stock trades about -0.09 of its potential returns per unit of risk. The Ming Yang Smart is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Ming Yang Smart on September 20, 2024 and sell it today you would earn a total of  45.00  from holding Ming Yang Smart or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Qi An Xin  vs.  Ming Yang Smart

Qi An Xin

Risk-Adjusted Performance

10 of 100

OK

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

Ming Yang Smart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Yang Smart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ming Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qi An and Ming Yang

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

The idea behind Qi An Xin and Ming Yang Smart 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.