Correlation Between Mengtian Home and Qtone Education

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

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

Diversification Opportunities for Mengtian Home and Qtone Education

0.7

Correlation Coefficient

Mengtian Home  Qtone Education

Poor diversification

The 3 months correlation between Mengtian and Qtone is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and Qtone Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qtone Education Group and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with Qtone Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qtone Education Group has no effect on the direction of Mengtian Home i.e., Mengtian Home and Qtone Education go up and down completely randomly.

Pair Corralation between Mengtian Home and Qtone Education

Assuming the 90 days trading horizon Mengtian Home is expected to generate 1.41 times less return on investment than Qtone Education. But when comparing it to its historical volatility, Mengtian Home Group is 1.43 times less risky than Qtone Education. It trades about 0.11 of its potential returns per unit of risk. Qtone Education Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  452.00  in Qtone Education Group on September 25, 2024 and sell it today you would earn a total of  123.00  from holding Qtone Education Group or generate 27.21% return on investment over 90 days.

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

Mengtian Home Group  vs.  Qtone Education Group

Mengtian Home Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Qtone Education Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qtone Education Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qtone Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mengtian Home and Qtone Education

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

The idea behind Mengtian Home Group and Qtone Education Group 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.