Correlation Between Shantui Construction and Qtone Education

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

By analyzing existing cross correlation between Shantui Construction Machinery and Qtone Education Group, you can compare the effects of market volatilities on Shantui Construction and Qtone Education 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 Shantui Construction with a short position of Qtone Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantui Construction and Qtone Education.

Diversification Opportunities for Shantui Construction and Qtone Education

0.82

Correlation Coefficient

Shantui Construction  Qtone Education

Very poor diversification

The 3 months correlation between Shantui and Qtone is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery and Qtone Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qtone Education Group and Shantui 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 Shantui Construction Machinery are associated (or correlated) with Qtone Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qtone Education Group has no effect on the direction of Shantui Construction i.e., Shantui Construction and Qtone Education go up and down completely randomly.

Pair Corralation between Shantui Construction and Qtone Education

Assuming the 90 days trading horizon Shantui Construction Machinery is expected to generate 0.69 times more return on investment than Qtone Education. However, Shantui Construction Machinery is 1.46 times less risky than Qtone Education. It trades about 0.26 of its potential returns per unit of risk. Qtone Education Group is currently generating about 0.14 per unit of risk. If you would invest  665.00  in Shantui Construction Machinery on September 5, 2024 and sell it today you would earn a total of  400.00  from holding Shantui Construction Machinery or generate 60.15% return on investment over 90 days.

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

Shantui Construction Machinery  vs.  Qtone Education Group

Shantui Construction

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantui Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Qtone Education Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qtone Education Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qtone Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shantui Construction and Qtone Education

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

The idea behind Shantui Construction Machinery and Qtone Education Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.