Correlation Between Qtone Education and Dongfeng Automobile

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

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

Diversification Opportunities for Qtone Education and Dongfeng Automobile

0.71

Correlation Coefficient

Qtone Education  Dongfeng Automobile

Poor diversification

The 3 months correlation between Qtone and Dongfeng is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Qtone Education Group and Dongfeng Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Automobile and Qtone Education 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 Qtone Education Group are associated (or correlated) with Dongfeng Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Automobile has no effect on the direction of Qtone Education i.e., Qtone Education and Dongfeng Automobile go up and down completely randomly.

Pair Corralation between Qtone Education and Dongfeng Automobile

Assuming the 90 days trading horizon Qtone Education Group is expected to under-perform the Dongfeng Automobile. In addition to that, Qtone Education is 1.24 times more volatile than Dongfeng Automobile Co. It trades about 0.0 of its total potential returns per unit of risk. Dongfeng Automobile Co is currently generating about 0.06 per unit of volatility. If you would invest  705.00  in Dongfeng Automobile Co on September 30, 2024 and sell it today you would earn a total of  68.00  from holding Dongfeng Automobile Co or generate 9.65% return on investment over 90 days.

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

Qtone Education Group  vs.  Dongfeng Automobile Co

Qtone Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qtone Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Qtone Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongfeng Automobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Automobile Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongfeng Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qtone Education and Dongfeng Automobile

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

The idea behind Qtone Education Group and Dongfeng Automobile Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.