Correlation Between Derwent London and Qingdao Haier
Can any of the company-specific risk be diversified away by investing in both Derwent London and Qingdao Haier 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 Derwent London and Qingdao Haier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Derwent London PLC and Qingdao Haier Co, you can compare the effects of market volatilities on Derwent London and Qingdao Haier 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 Derwent London with a short position of Qingdao Haier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derwent London and Qingdao Haier.
Diversification Opportunities for Derwent London and Qingdao Haier
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Derwent and Qingdao is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Derwent London PLC and Qingdao Haier Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier and Derwent London 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 Derwent London PLC are associated (or correlated) with Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier has no effect on the direction of Derwent London i.e., Derwent London and Qingdao Haier go up and down completely randomly.
Pair Corralation between Derwent London and Qingdao Haier
Assuming the 90 days horizon Derwent London is expected to generate 1.39 times less return on investment than Qingdao Haier. In addition to that, Derwent London is 1.01 times more volatile than Qingdao Haier Co. It trades about 0.04 of its total potential returns per unit of risk. Qingdao Haier Co is currently generating about 0.06 per unit of volatility. If you would invest 99.00 in Qingdao Haier Co on September 2, 2024 and sell it today you would earn a total of 71.00 from holding Qingdao Haier Co or generate 71.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Derwent London PLC vs. Qingdao Haier Co
Performance |
| Timeline |
| Derwent London PLC |
| Qingdao Haier |
Derwent London and Qingdao Haier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Derwent London and Qingdao Haier
The main advantage of trading using opposite Derwent London and Qingdao Haier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Derwent London position performs unexpectedly, Qingdao Haier 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 Qingdao Haier will offset losses from the drop in Qingdao Haier's long position.| Derwent London vs. ALBIS LEASING AG | Derwent London vs. Neinor Homes SA | Derwent London vs. Haier Smart Home | Derwent London vs. INVITATION HOMES DL |
| Qingdao Haier vs. Qingdao Haier Co | Qingdao Haier vs. SEB SA | Qingdao Haier vs. Derwent London PLC | Qingdao Haier vs. Electrolux Professional AB |
Check out your portfolio center.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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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