Correlation Between Hunan Investment and Ningxia Younglight

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Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Ningxia Younglight 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 Hunan Investment and Ningxia Younglight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hunan Investment Group and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Hunan Investment and Ningxia Younglight 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 Hunan Investment with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Ningxia Younglight.

Diversification Opportunities for Hunan Investment and Ningxia Younglight

HunanNingxiaDiversified AwayHunanNingxiaDiversified Away100%
0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hunan and Ningxia is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Hunan Investment i.e., Hunan Investment and Ningxia Younglight go up and down completely randomly.

Pair Corralation between Hunan Investment and Ningxia Younglight

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 0.79 times more return on investment than Ningxia Younglight. However, Hunan Investment Group is 1.27 times less risky than Ningxia Younglight. It trades about 0.03 of its potential returns per unit of risk. Ningxia Younglight Chemicals is currently generating about -0.05 per unit of risk. If you would invest  506.00  in Hunan Investment Group on October 31, 2024 and sell it today you would earn a total of  19.00  from holding Hunan Investment Group or generate 3.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hunan Investment Group  vs.  Ningxia Younglight Chemicals

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 0102030
JavaScript chart by amCharts 3.21.15000548 000635
       Timeline  
Hunan Investment 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanJan55.566.57
Ningxia Younglight 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ningxia Younglight Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanJan77.588.599.51010.5

Hunan Investment and Ningxia Younglight Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.77-6.57-4.37-2.170.02.144.396.658.911.16 0.0200.0250.0300.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15000548 000635
       Returns  

Pair Trading with Hunan Investment and Ningxia Younglight

The main advantage of trading using opposite Hunan Investment and Ningxia Younglight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Investment position performs unexpectedly, Ningxia Younglight 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 Ningxia Younglight will offset losses from the drop in Ningxia Younglight's long position.
The idea behind Hunan Investment Group and Ningxia Younglight Chemicals 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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