Correlation Between Qudian and Capital Southwest
Can any of the company-specific risk be diversified away by investing in both Qudian and Capital Southwest 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 Capital Southwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qudian Inc and Capital Southwest, you can compare the effects of market volatilities on Qudian and Capital Southwest 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 Capital Southwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qudian and Capital Southwest.
Diversification Opportunities for Qudian and Capital Southwest
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Qudian and Capital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest 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 Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of Qudian i.e., Qudian and Capital Southwest go up and down completely randomly.
Pair Corralation between Qudian and Capital Southwest
Allowing for the 90-day total investment horizon Qudian Inc is expected to under-perform the Capital Southwest. In addition to that, Qudian is 6.85 times more volatile than Capital Southwest. It trades about -0.11 of its total potential returns per unit of risk. Capital Southwest is currently generating about 0.01 per unit of volatility. If you would invest 2,565 in Capital Southwest on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Capital Southwest or generate 0.08% 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. Capital Southwest
Performance |
| Timeline |
| Qudian Inc |
| Capital Southwest |
Qudian and Capital Southwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qudian and Capital Southwest
The main advantage of trading using opposite Qudian and Capital Southwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qudian position performs unexpectedly, Capital Southwest 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 Capital Southwest will offset losses from the drop in Capital Southwest's long position.The idea behind Qudian Inc and Capital Southwest 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.| Capital Southwest vs. Marine Products | Capital Southwest vs. Helmerich and Payne | Capital Southwest vs. Sonos Inc | Capital Southwest vs. National Beverage Corp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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