Correlation Between Qudian and B Riley

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

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

Diversification Opportunities for Qudian and B Riley

0.76

Correlation Coefficient

Qudian  B Riley

Poor diversification

The 3 months correlation between Qudian and RILYK is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial and Qudian 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 Qudian Inc are associated (or correlated) with B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Qudian i.e., Qudian and B Riley go up and down completely randomly.

Pair Corralation between Qudian and B Riley

Allowing for the 90-day total investment horizon Qudian Inc is expected to generate 1.75 times more return on investment than B Riley. However, Qudian is 1.75 times more volatile than B Riley Financial. It trades about 0.19 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.17 per unit of risk. If you would invest  177.00  in Qudian Inc on September 2, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Qudian Inc  vs.  B Riley Financial

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.

B Riley Financial

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Qudian and B Riley

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

The idea behind Qudian Inc and B Riley Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.