Correlation Between Leaguer Shenzhen and Qinghaihuading Industrial

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

By analyzing existing cross correlation between Leaguer Shenzhen MicroElectronics and Qinghaihuading Industrial Co, you can compare the effects of market volatilities on Leaguer Shenzhen and Qinghaihuading Industrial 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 Leaguer Shenzhen with a short position of Qinghaihuading Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leaguer Shenzhen and Qinghaihuading Industrial.

Diversification Opportunities for Leaguer Shenzhen and Qinghaihuading Industrial

0.56

Correlation Coefficient

Leaguer Shenzhen  Qinghaihuading Industrial

Very weak diversification

The 3 months correlation between Leaguer and Qinghaihuading is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Leaguer Shenzhen MicroElectron and Qinghaihuading Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghaihuading Industrial and Leaguer Shenzhen 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 Leaguer Shenzhen MicroElectronics are associated (or correlated) with Qinghaihuading Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghaihuading Industrial has no effect on the direction of Leaguer Shenzhen i.e., Leaguer Shenzhen and Qinghaihuading Industrial go up and down completely randomly.

Pair Corralation between Leaguer Shenzhen and Qinghaihuading Industrial

Assuming the 90 days trading horizon Leaguer Shenzhen MicroElectronics is expected to generate 0.95 times more return on investment than Qinghaihuading Industrial. However, Leaguer Shenzhen MicroElectronics is 1.05 times less risky than Qinghaihuading Industrial. It trades about 0.09 of its potential returns per unit of risk. Qinghaihuading Industrial Co is currently generating about 0.0 per unit of risk. If you would invest  2,553  in Leaguer Shenzhen MicroElectronics on September 30, 2024 and sell it today you would earn a total of  462.00  from holding Leaguer Shenzhen MicroElectronics or generate 18.1% return on investment over 90 days.

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

Leaguer Shenzhen MicroElectron  vs.  Qinghaihuading Industrial Co

Leaguer Shenzhen Mic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leaguer Shenzhen MicroElectronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Leaguer Shenzhen sustained solid returns over the last few months and may actually be approaching a breakup point.

Qinghaihuading Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Leaguer Shenzhen and Qinghaihuading Industrial

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

The idea behind Leaguer Shenzhen MicroElectronics and Qinghaihuading Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.