Correlation Between Qingdao Foods and Allgens Medical

Can any of the company-specific risk be diversified away by investing in both Qingdao Foods and Allgens Medical 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 Allgens Medical 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 Allgens Medical Technology, you can compare the effects of market volatilities on Qingdao Foods and Allgens Medical 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 Allgens Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Foods and Allgens Medical.

Diversification Opportunities for Qingdao Foods and Allgens Medical

0.88

Correlation Coefficient

Qingdao Foods  Allgens Medical

Very poor diversification

The 3 months correlation between Qingdao and Allgens is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co and Allgens Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allgens Medical Tech 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 Allgens Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allgens Medical Tech has no effect on the direction of Qingdao Foods i.e., Qingdao Foods and Allgens Medical go up and down completely randomly.

Pair Corralation between Qingdao Foods and Allgens Medical

Assuming the 90 days trading horizon Qingdao Foods Co is expected to generate 0.88 times more return on investment than Allgens Medical. However, Qingdao Foods Co is 1.13 times less risky than Allgens Medical. It trades about 0.16 of its potential returns per unit of risk. Allgens Medical Technology is currently generating about 0.1 per unit of risk. If you would invest  1,129  in Qingdao Foods Co on September 5, 2024 and sell it today you would earn a total of  328.00  from holding Qingdao Foods Co or generate 29.05% 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.  Allgens Medical Technology

Qingdao Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 12 (%) 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.

Allgens Medical Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allgens Medical Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allgens Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qingdao Foods and Allgens Medical

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

The idea behind Qingdao Foods Co and Allgens Medical Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.