Correlation Between QEP and Nobility Homes

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

By analyzing existing cross correlation between QEP Co Inc and Nobility Homes, you can compare the effects of market volatilities on QEP and Nobility Homes 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 QEP with a short position of Nobility Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of QEP and Nobility Homes.

Diversification Opportunities for QEP and Nobility Homes

0.66

Correlation Coefficient

QEP  Nobility Homes

Poor diversification

The 3 months correlation between QEP and Nobility is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding QEP Co Inc and Nobility Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nobility Homes and QEP 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 QEP Co Inc are associated (or correlated) with Nobility Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nobility Homes has no effect on the direction of QEP i.e., QEP and Nobility Homes go up and down completely randomly.

Pair Corralation between QEP and Nobility Homes

If you would invest  2,430  in QEP Co Inc on March 13, 2024 and sell it today you would earn a total of  125.00  from holding QEP Co Inc or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	10.0%
Values	Daily Returns

QEP Co Inc  vs.  Nobility Homes

QEP Co Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days QEP Co Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating basic indicators, QEP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nobility Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nobility Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Nobility Homes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with QEP and Nobility Homes

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

The idea behind QEP Co Inc and Nobility Homes 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.