Correlation Between PACCAR and Qingling Motors
Can any of the company-specific risk be diversified away by investing in both PACCAR and Qingling Motors 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 PACCAR and Qingling Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Qingling Motors Co, you can compare the effects of market volatilities on PACCAR and Qingling Motors 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 PACCAR with a short position of Qingling Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Qingling Motors.
Diversification Opportunities for PACCAR and Qingling Motors
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PACCAR and Qingling is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Qingling Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingling Motors and PACCAR 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 PACCAR Inc are associated (or correlated) with Qingling Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingling Motors has no effect on the direction of PACCAR i.e., PACCAR and Qingling Motors go up and down completely randomly.
Pair Corralation between PACCAR and Qingling Motors
Assuming the 90 days horizon PACCAR Inc is expected to under-perform the Qingling Motors. But the stock apears to be less risky and, when comparing its historical volatility, PACCAR Inc is 1.92 times less risky than Qingling Motors. The stock trades about -0.21 of its potential returns per unit of risk. The Qingling Motors Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5.68 in Qingling Motors Co on September 28, 2024 and sell it today you would earn a total of 0.52 from holding Qingling Motors Co or generate 9.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PACCAR Inc vs. Qingling Motors Co
Performance |
| Timeline |
| PACCAR Inc |
| Qingling Motors |
PACCAR and Qingling Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Qingling Motors
The main advantage of trading using opposite PACCAR and Qingling Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, Qingling Motors 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 Qingling Motors will offset losses from the drop in Qingling Motors' long position.The idea behind PACCAR Inc and Qingling Motors Co 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.| Qingling Motors vs. PACCAR Inc | Qingling Motors vs. Sinotruk Limited | Qingling Motors vs. Hyster Yale Materials Handling |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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