Correlation Between Hengerda New and Qiming Information

Can any of the company-specific risk be diversified away by investing in both Hengerda New and Qiming Information 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 Hengerda New and Qiming Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hengerda New Materials and Qiming Information Technology, you can compare the effects of market volatilities on Hengerda New and Qiming Information 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 Hengerda New with a short position of Qiming Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengerda New and Qiming Information.

Diversification Opportunities for Hengerda New and Qiming Information

0.76

Correlation Coefficient

Hengerda New  Qiming Information

Poor diversification

The 3 months correlation between Hengerda and Qiming is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and Qiming Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiming Information and Hengerda New 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 Hengerda New Materials are associated (or correlated) with Qiming Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiming Information has no effect on the direction of Hengerda New i.e., Hengerda New and Qiming Information go up and down completely randomly.

Pair Corralation between Hengerda New and Qiming Information

Assuming the 90 days trading horizon Hengerda New Materials is expected to generate 0.77 times more return on investment than Qiming Information. However, Hengerda New Materials is 1.3 times less risky than Qiming Information. It trades about 0.07 of its potential returns per unit of risk. Qiming Information Technology is currently generating about 0.03 per unit of risk. If you would invest  2,476  in Hengerda New Materials on September 27, 2024 and sell it today you would earn a total of  297.00  from holding Hengerda New Materials or generate 12.0% return on investment over 90 days.

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

Hengerda New Materials  vs.  Qiming Information Technology

Hengerda New Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengerda New sustained solid returns over the last few months and may actually be approaching a breakup point.

Qiming Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qiming Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiming Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hengerda New and Qiming Information

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

The idea behind Hengerda New Materials and Qiming Information 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.