Correlation Between Ping An and Qijing Machinery

Can any of the company-specific risk be diversified away by investing in both Ping An and Qijing Machinery 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 Ping An and Qijing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Qijing Machinery, you can compare the effects of market volatilities on Ping An and Qijing Machinery 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 Ping An with a short position of Qijing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Qijing Machinery.

Diversification Opportunities for Ping An and Qijing Machinery

0.83

Correlation Coefficient

Ping An  Qijing Machinery

Very poor diversification

The 3 months correlation between Ping and Qijing is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery and Ping An 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 Ping An Insurance are associated (or correlated) with Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Ping An i.e., Ping An and Qijing Machinery go up and down completely randomly.

Pair Corralation between Ping An and Qijing Machinery

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Qijing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.14 times less risky than Qijing Machinery. The stock trades about -0.11 of its potential returns per unit of risk. The Qijing Machinery is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,439  in Qijing Machinery on September 4, 2024 and sell it today you would lose (25.00) from holding Qijing Machinery or give up 1.74% of portfolio value over 90 days.

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

Ping An Insurance  vs.  Qijing Machinery

Ping An Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Qijing Machinery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Qijing Machinery

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

The idea behind Ping An Insurance and Qijing Machinery 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.