Correlation Between Qingling Motors and Heidelberg Materials

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

By analyzing existing cross correlation between Qingling Motors Co and Heidelberg Materials AG, you can compare the effects of market volatilities on Qingling Motors and Heidelberg Materials 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 Qingling Motors with a short position of Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingling Motors and Heidelberg Materials.

Diversification Opportunities for Qingling Motors and Heidelberg Materials

0.3

Correlation Coefficient

Qingling Motors  Heidelberg Materials

Weak diversification

The 3 months correlation between Qingling and Heidelberg is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Qingling Motors Co and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials and Qingling Motors 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 Qingling Motors Co are associated (or correlated) with Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Qingling Motors i.e., Qingling Motors and Heidelberg Materials go up and down completely randomly.

Pair Corralation between Qingling Motors and Heidelberg Materials

Assuming the 90 days horizon Qingling Motors is expected to generate 7.95 times less return on investment than Heidelberg Materials. But when comparing it to its historical volatility, Qingling Motors Co is 1.63 times less risky than Heidelberg Materials. It trades about 0.03 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11,965  in Heidelberg Materials AG on December 30, 2024 and sell it today you would earn a total of  4,330  from holding Heidelberg Materials AG or generate 36.19% return on investment over 90 days.

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

Qingling Motors Co  vs.  Heidelberg Materials AG

Qingling Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qingling Motors Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Qingling Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Heidelberg Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qingling Motors and Heidelberg Materials

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

The idea behind Qingling Motors Co and Heidelberg Materials AG 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.