Correlation Between Qingdao Hiron and Chongqing Road

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Can any of the company-specific risk be diversified away by investing in both Qingdao Hiron and Chongqing Road 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 Qingdao Hiron and Chongqing Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qingdao Hiron Commercial and Chongqing Road Bridge, you can compare the effects of market volatilities on Qingdao Hiron and Chongqing Road 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 Qingdao Hiron with a short position of Chongqing Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Hiron and Chongqing Road.

Diversification Opportunities for Qingdao Hiron and Chongqing Road

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Qingdao and Chongqing is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Hiron Commercial and Chongqing Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Road Bridge and Qingdao Hiron 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 Qingdao Hiron Commercial are associated (or correlated) with Chongqing Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Road Bridge has no effect on the direction of Qingdao Hiron i.e., Qingdao Hiron and Chongqing Road go up and down completely randomly.

Pair Corralation between Qingdao Hiron and Chongqing Road

Assuming the 90 days trading horizon Qingdao Hiron Commercial is expected to generate 0.77 times more return on investment than Chongqing Road. However, Qingdao Hiron Commercial is 1.3 times less risky than Chongqing Road. It trades about 0.05 of its potential returns per unit of risk. Chongqing Road Bridge is currently generating about -0.01 per unit of risk. If you would invest  1,108  in Qingdao Hiron Commercial on November 3, 2024 and sell it today you would earn a total of  14.00  from holding Qingdao Hiron Commercial or generate 1.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Qingdao Hiron Commercial  vs.  Chongqing Road Bridge

 Performance 
       Timeline  
Qingdao Hiron Commercial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Qingdao Hiron Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Qingdao Hiron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Chongqing Road Bridge 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chongqing Road Bridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Qingdao Hiron and Chongqing Road Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Qingdao Hiron and Chongqing Road

The main advantage of trading using opposite Qingdao Hiron and Chongqing Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qingdao Hiron position performs unexpectedly, Chongqing Road 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 Chongqing Road will offset losses from the drop in Chongqing Road's long position.
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The idea behind Qingdao Hiron Commercial and Chongqing Road Bridge 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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