Correlation Between QCR Holdings and Ducommun Incorporated

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

By analyzing existing cross correlation between QCR Holdings and Ducommun Incorporated, you can compare the effects of market volatilities on QCR Holdings and Ducommun Incorporated 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 QCR Holdings with a short position of Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of QCR Holdings and Ducommun Incorporated.

Diversification Opportunities for QCR Holdings and Ducommun Incorporated

0.53

Correlation Coefficient

QCR Holdings  Ducommun Incorporated

Very weak diversification

The 3 months correlation between QCR and Ducommun is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding QCR Holdings and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and QCR Holdings 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 QCR Holdings are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of QCR Holdings i.e., QCR Holdings and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between QCR Holdings and Ducommun Incorporated

Given the investment horizon of 90 days QCR Holdings is expected to generate 1.26 times more return on investment than Ducommun Incorporated. However, QCR Holdings is 1.26 times more volatile than Ducommun Incorporated. It trades about 0.15 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.05 per unit of risk. If you would invest  7,505  in QCR Holdings on September 4, 2024 and sell it today you would earn a total of  1,677  from holding QCR Holdings or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

QCR Holdings  vs.  Ducommun Incorporated

QCR Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QCR Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, QCR Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ducommun Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ducommun Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with QCR Holdings and Ducommun Incorporated

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

The idea behind QCR Holdings and Ducommun Incorporated 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.