Correlation Between Quaker Chemical and Chuangs China

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

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

Diversification Opportunities for Quaker Chemical and Chuangs China

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Correlation Coefficient

Quaker Chemical  Chuangs China

Pay attention - limited upside

The 3 months correlation between Quaker and Chuangs is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Chuangs China Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuangs China Investments and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with Chuangs China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuangs China Investments has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and Chuangs China go up and down completely randomly.

Pair Corralation between Quaker Chemical and Chuangs China

Assuming the 90 days horizon Quaker Chemical is expected to under-perform the Chuangs China. But the stock apears to be less risky and, when comparing its historical volatility, Quaker Chemical is 2.81 times less risky than Chuangs China. The stock trades about -0.05 of its potential returns per unit of risk. The Chuangs China Investments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Chuangs China Investments on October 24, 2024 and sell it today you would lose (0.30) from holding Chuangs China Investments or give up 23.08% of portfolio value over 90 days.

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

Quaker Chemical  vs.  Chuangs China Investments

Quaker Chemical

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Quaker Chemical and Chuangs China

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

The idea behind Quaker Chemical and Chuangs China 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.