Correlation Between Hunan Investment and Ningxia Building

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

Diversification Opportunities for Hunan Investment and Ningxia Building

0.45

Correlation Coefficient

Hunan Investment  Ningxia Building

Very weak diversification

The 3 months correlation between Hunan and Ningxia is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat 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 Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Hunan Investment i.e., Hunan Investment and Ningxia Building go up and down completely randomly.

Pair Corralation between Hunan Investment and Ningxia Building

Assuming the 90 days trading horizon Hunan Investment Group is expected to under-perform the Ningxia Building. But the stock apears to be less risky and, when comparing its historical volatility, Hunan Investment Group is 1.27 times less risky than Ningxia Building. The stock trades about -0.14 of its potential returns per unit of risk. The Ningxia Building Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,432  in Ningxia Building Materials on December 4, 2024 and sell it today you would lose (92.00) from holding Ningxia Building Materials or give up 6.42% of portfolio value over 90 days.

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

Hunan Investment Group  vs.  Ningxia Building Materials

Hunan Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hunan Investment Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ningxia Building Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningxia Building is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hunan Investment and Ningxia Building

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

The idea behind Hunan Investment Group and Ningxia Building Materials 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.