Correlation Between Qumei Furniture and Shenzhen Zhenye

Can any of the company-specific risk be diversified away by investing in both Qumei Furniture and Shenzhen Zhenye 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 Qumei Furniture and Shenzhen Zhenye into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Qumei Furniture and Shenzhen Zhenye

0.79

Correlation Coefficient

Qumei Furniture  Shenzhen Zhenye

Poor diversification

The 3 months correlation between Qumei and Shenzhen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and Shenzhen Zhenye Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Zhenye Group and Qumei Furniture 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 Qumei Furniture Group are associated (or correlated) with Shenzhen Zhenye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Zhenye Group has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and Shenzhen Zhenye go up and down completely randomly.

Pair Corralation between Qumei Furniture and Shenzhen Zhenye

Assuming the 90 days trading horizon Qumei Furniture is expected to generate 8.05 times less return on investment than Shenzhen Zhenye. But when comparing it to its historical volatility, Qumei Furniture Group is 1.48 times less risky than Shenzhen Zhenye. It trades about 0.02 of its potential returns per unit of risk. Shenzhen Zhenye Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  559.00  in Shenzhen Zhenye Group on September 29, 2024 and sell it today you would earn a total of  243.00  from holding Shenzhen Zhenye Group or generate 43.47% return on investment over 90 days.

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

Qumei Furniture Group  vs.  Shenzhen Zhenye Group

Qumei Furniture Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qumei Furniture Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qumei Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Zhenye Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhenye Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhenye sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qumei Furniture and Shenzhen Zhenye

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

The idea behind Qumei Furniture Group and Shenzhen Zhenye 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.