Correlation Between Jiaozuo Wanfang and Hunan Nanling

Can any of the company-specific risk be diversified away by investing in both Jiaozuo Wanfang and Hunan Nanling 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 Jiaozuo Wanfang and Hunan Nanling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jiaozuo Wanfang Aluminum and Hunan Nanling Industrial, you can compare the effects of market volatilities on Jiaozuo Wanfang and Hunan Nanling 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 Jiaozuo Wanfang with a short position of Hunan Nanling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiaozuo Wanfang and Hunan Nanling.

Diversification Opportunities for Jiaozuo Wanfang and Hunan Nanling

0.79

Correlation Coefficient

Jiaozuo Wanfang  Hunan Nanling

Poor diversification

The 3 months correlation between Jiaozuo and Hunan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Jiaozuo Wanfang Aluminum and Hunan Nanling Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Nanling Industrial and Jiaozuo Wanfang 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 Jiaozuo Wanfang Aluminum are associated (or correlated) with Hunan Nanling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Nanling Industrial has no effect on the direction of Jiaozuo Wanfang i.e., Jiaozuo Wanfang and Hunan Nanling go up and down completely randomly.

Pair Corralation between Jiaozuo Wanfang and Hunan Nanling

Assuming the 90 days trading horizon Jiaozuo Wanfang Aluminum is expected to generate 1.31 times more return on investment than Hunan Nanling. However, Jiaozuo Wanfang is 1.31 times more volatile than Hunan Nanling Industrial. It trades about 0.17 of its potential returns per unit of risk. Hunan Nanling Industrial is currently generating about 0.08 per unit of risk. If you would invest  524.00  in Jiaozuo Wanfang Aluminum on September 13, 2024 and sell it today you would earn a total of  192.00  from holding Jiaozuo Wanfang Aluminum or generate 36.64% return on investment over 90 days.

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

Jiaozuo Wanfang Aluminum  vs.  Hunan Nanling Industrial

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Nanling Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Nanling Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Nanling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiaozuo Wanfang and Hunan Nanling

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

The idea behind Jiaozuo Wanfang Aluminum and Hunan Nanling Industrial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.