Correlation Between Quality Construction and QTC Energy

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

By analyzing existing cross correlation between Quality Construction Products and QTC Energy Public, you can compare the effects of market volatilities on Quality Construction and QTC Energy 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 Quality Construction with a short position of QTC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Construction and QTC Energy.

Diversification Opportunities for Quality Construction and QTC Energy

0.22

Correlation Coefficient

Quality Construction  QTC Energy

Modest diversification

The 3 months correlation between Quality and QTC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Quality Construction Products and QTC Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QTC Energy Public and Quality Construction 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 Quality Construction Products are associated (or correlated) with QTC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QTC Energy Public has no effect on the direction of Quality Construction i.e., Quality Construction and QTC Energy go up and down completely randomly.

Pair Corralation between Quality Construction and QTC Energy

Assuming the 90 days trading horizon Quality Construction Products is expected to under-perform the QTC Energy. In addition to that, Quality Construction is 1.64 times more volatile than QTC Energy Public. It trades about -0.05 of its total potential returns per unit of risk. QTC Energy Public is currently generating about -0.01 per unit of volatility. If you would invest  392.00  in QTC Energy Public on September 5, 2024 and sell it today you would lose (6.00) from holding QTC Energy Public or give up 1.53% of portfolio value over 90 days.

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

Quality Construction Products  vs.  QTC Energy Public

Quality Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quality Construction Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

QTC Energy Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QTC Energy Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, QTC Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Quality Construction and QTC Energy

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

The idea behind Quality Construction Products and QTC Energy Public 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.