Correlation Between QKL Stores and Crimson Wine

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

By analyzing existing cross correlation between QKL Stores and Crimson Wine, you can compare the effects of market volatilities on QKL Stores and Crimson Wine 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 QKL Stores with a short position of Crimson Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of QKL Stores and Crimson Wine.

Diversification Opportunities for QKL Stores and Crimson Wine

0.0

Correlation Coefficient

QKL Stores  Crimson Wine

Pay attention - limited upside

The 3 months correlation between QKL and Crimson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding QKL Stores and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine and QKL Stores 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 QKL Stores are associated (or correlated) with Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of QKL Stores i.e., QKL Stores and Crimson Wine go up and down completely randomly.

Pair Corralation between QKL Stores and Crimson Wine

Given the investment horizon of 90 days QKL Stores is expected to under-perform the Crimson Wine. In addition to that, QKL Stores is 4.13 times more volatile than Crimson Wine. It trades about -0.07 of its total potential returns per unit of risk. Crimson Wine is currently generating about -0.02 per unit of volatility. If you would invest  720.00  in Crimson Wine on January 20, 2024 and sell it today you would lose (140.00) from holding Crimson Wine or give up 19.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	39.6%
Values	Daily Returns

QKL Stores  vs.  Crimson Wine

QKL Stores

Risk-Adjusted Performance

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Very Weak

Over the last 90 days QKL Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, QKL Stores is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Crimson Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with QKL Stores and Crimson Wine

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

The idea behind QKL Stores and Crimson Wine 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.