Correlation Between Qumei Furniture and Franklin Templeton

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

By analyzing existing cross correlation between Qumei Furniture Group and Franklin Templeton Limited, you can compare the effects of market volatilities on Qumei Furniture and Franklin Templeton 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 Qumei Furniture with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qumei Furniture and Franklin Templeton.

Diversification Opportunities for Qumei Furniture and Franklin Templeton

-0.26

Correlation Coefficient

Qumei Furniture  Franklin Templeton

Very good diversification

The 3 months correlation between Qumei and Franklin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Qumei Furniture Group and Franklin Templeton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton and Qumei Furniture 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 Qumei Furniture Group are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton has no effect on the direction of Qumei Furniture i.e., Qumei Furniture and Franklin Templeton go up and down completely randomly.

Pair Corralation between Qumei Furniture and Franklin Templeton

Assuming the 90 days trading horizon Qumei Furniture Group is expected to generate 8.65 times more return on investment than Franklin Templeton. However, Qumei Furniture is 8.65 times more volatile than Franklin Templeton Limited. It trades about 0.22 of its potential returns per unit of risk. Franklin Templeton Limited is currently generating about -0.16 per unit of risk. If you would invest  253.00  in Qumei Furniture Group on August 20, 2024 and sell it today you would earn a total of  46.00  from holding Qumei Furniture Group or generate 18.18% return on investment over 90 days.

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

Qumei Furniture Group  vs.  Franklin Templeton Limited

Qumei Furniture Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qumei Furniture Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qumei Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Franklin Templeton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Templeton Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Franklin Templeton is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Qumei Furniture and Franklin Templeton

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

The idea behind Qumei Furniture Group and Franklin Templeton Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.