Correlation Between Qingdao Foods and Ningbo Bohui

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

By analyzing existing cross correlation between Qingdao Foods Co and Ningbo Bohui Chemical, you can compare the effects of market volatilities on Qingdao Foods and Ningbo Bohui 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 Qingdao Foods with a short position of Ningbo Bohui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Foods and Ningbo Bohui.

Diversification Opportunities for Qingdao Foods and Ningbo Bohui

0.81

Correlation Coefficient

Qingdao Foods  Ningbo Bohui

Very poor diversification

The 3 months correlation between Qingdao and Ningbo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Ningbo Bohui Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bohui Chemical and Qingdao Foods 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 Qingdao Foods Co are associated (or correlated) with Ningbo Bohui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bohui Chemical has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Ningbo Bohui go up and down completely randomly.

Pair Corralation between Qingdao Foods and Ningbo Bohui

Assuming the 90 days trading horizon Qingdao Foods Co is expected to generate 0.79 times more return on investment than Ningbo Bohui. However, Qingdao Foods Co is 1.26 times less risky than Ningbo Bohui. It trades about 0.08 of its potential returns per unit of risk. Ningbo Bohui Chemical is currently generating about 0.05 per unit of risk. If you would invest  1,206  in Qingdao Foods Co on September 27, 2024 and sell it today you would earn a total of  167.00  from holding Qingdao Foods Co or generate 13.85% return on investment over 90 days.

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

Qingdao Foods Co  vs.  Ningbo Bohui Chemical

Qingdao Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Bohui Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bohui Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Bohui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Qingdao Foods and Ningbo Bohui

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

The idea behind Qingdao Foods Co and Ningbo Bohui Chemical 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.