Correlation Between Hunan Investment and Nantong Jiangshan

Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Nantong Jiangshan 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 Nantong Jiangshan 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 Nantong Jiangshan Agrochemical, you can compare the effects of market volatilities on Hunan Investment and Nantong Jiangshan 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 Nantong Jiangshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Nantong Jiangshan.

Diversification Opportunities for Hunan Investment and Nantong Jiangshan

0.71

Correlation Coefficient

Hunan Investment  Nantong Jiangshan

Poor diversification

The 3 months correlation between Hunan and Nantong is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Nantong Jiangshan Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Jiangshan 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 Nantong Jiangshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Jiangshan has no effect on the direction of Hunan Investment i.e., Hunan Investment and Nantong Jiangshan go up and down completely randomly.

Pair Corralation between Hunan Investment and Nantong Jiangshan

Assuming the 90 days trading horizon Hunan Investment is expected to generate 3.61 times less return on investment than Nantong Jiangshan. But when comparing it to its historical volatility, Hunan Investment Group is 1.34 times less risky than Nantong Jiangshan. It trades about 0.03 of its potential returns per unit of risk. Nantong Jiangshan Agrochemical is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,457  in Nantong Jiangshan Agrochemical on December 25, 2024 and sell it today you would earn a total of  133.00  from holding Nantong Jiangshan Agrochemical or generate 9.13% return on investment over 90 days.

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

Hunan Investment Group  vs.  Nantong Jiangshan Agrochemical

Hunan Investment

Risk-Adjusted Performance

Very 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.

Nantong Jiangshan

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Jiangshan Agrochemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nantong Jiangshan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hunan Investment and Nantong Jiangshan

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

The idea behind Hunan Investment Group and Nantong Jiangshan Agrochemical 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.