Correlation Between Qudian and Two Harbors

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

By analyzing existing cross correlation between Qudian Inc and Two Harbors Investments, you can compare the effects of market volatilities on Qudian and Two Harbors 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 Qudian with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qudian and Two Harbors.

Diversification Opportunities for Qudian and Two Harbors

0.15

Correlation Coefficient

Qudian  Two Harbors

Average diversification

The 3 months correlation between Qudian and Two is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments and Qudian 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 Qudian Inc are associated (or correlated) with Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investments has no effect on the direction of Qudian i.e., Qudian and Two Harbors go up and down completely randomly.

Pair Corralation between Qudian and Two Harbors

Allowing for the 90-day total investment horizon Qudian Inc is expected to under-perform the Two Harbors. In addition to that, Qudian is 2.2 times more volatile than Two Harbors Investments. It trades about -0.03 of its total potential returns per unit of risk. Two Harbors Investments is currently generating about 0.2 per unit of volatility. If you would invest  1,136  in Two Harbors Investments on December 26, 2024 and sell it today you would earn a total of  211.00  from holding Two Harbors Investments or generate 18.57% return on investment over 90 days.

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

Qudian Inc  vs.  Two Harbors Investments

Qudian Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qudian Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Qudian is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Two Harbors Investments

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Two Harbors displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qudian and Two Harbors

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

The idea behind Qudian Inc and Two Harbors Investments 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.