Correlation Between China Pharma and Qilian International

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

By analyzing existing cross correlation between China Pharma Holdings and Qilian International Holding, you can compare the effects of market volatilities on China Pharma and Qilian International 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 China Pharma with a short position of Qilian International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Pharma and Qilian International.

Diversification Opportunities for China Pharma and Qilian International

0.09

Correlation Coefficient

China Pharma  Qilian International

Significant diversification

The 3 months correlation between China and Qilian is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Pharma Holdings and Qilian International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qilian International and China Pharma 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 China Pharma Holdings are associated (or correlated) with Qilian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qilian International has no effect on the direction of China Pharma i.e., China Pharma and Qilian International go up and down completely randomly.

Pair Corralation between China Pharma and Qilian International

Given the investment horizon of 90 days China Pharma is expected to generate 44.14 times less return on investment than Qilian International. But when comparing it to its historical volatility, China Pharma Holdings is 1.61 times less risky than Qilian International. It trades about 0.01 of its potential returns per unit of risk. Qilian International Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Qilian International Holding on March 18, 2024 and sell it today you would earn a total of  14.00  from holding Qilian International Holding or generate 20.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Pharma Holdings  vs.  Qilian International Holding

China Pharma Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Pharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, China Pharma is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Qilian International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qilian International Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile essential indicators, Qilian International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Pharma and Qilian International

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

The idea behind China Pharma Holdings and Qilian International Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.