Correlation Between Broad Capital and Qudian

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

By analyzing existing cross correlation between Broad Capital Acquisition and Qudian Inc, you can compare the effects of market volatilities on Broad Capital and Qudian 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 Broad Capital with a short position of Qudian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broad Capital and Qudian.

Diversification Opportunities for Broad Capital and Qudian

-0.61

Correlation Coefficient

Broad Capital  Qudian

Excellent diversification

The 3 months correlation between Broad and Qudian is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Broad Capital Acquisition and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc and Broad Capital 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 Broad Capital Acquisition are associated (or correlated) with Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of Broad Capital i.e., Broad Capital and Qudian go up and down completely randomly.

Pair Corralation between Broad Capital and Qudian

Assuming the 90 days horizon Broad Capital Acquisition is expected to under-perform the Qudian. But the stock apears to be less risky and, when comparing its historical volatility, Broad Capital Acquisition is 5.64 times less risky than Qudian. The stock trades about -0.13 of its potential returns per unit of risk. The Qudian Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Qudian Inc on September 3, 2024 and sell it today you would earn a total of  137.00  from holding Qudian Inc or generate 77.4% return on investment over 90 days.

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

Broad Capital Acquisition  vs.  Qudian Inc

Broad Capital Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broad Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Qudian Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broad Capital and Qudian

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

The idea behind Broad Capital Acquisition and Qudian Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.