Correlation Between Ningxia Younglight and Zhangzhou Pientzehuang

Can any of the company-specific risk be diversified away by investing in both Ningxia Younglight and Zhangzhou Pientzehuang 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 Ningxia Younglight and Zhangzhou Pientzehuang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningxia Younglight Chemicals and Zhangzhou Pientzehuang Pharmaceutical, you can compare the effects of market volatilities on Ningxia Younglight and Zhangzhou Pientzehuang 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 Ningxia Younglight with a short position of Zhangzhou Pientzehuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Younglight and Zhangzhou Pientzehuang.

Diversification Opportunities for Ningxia Younglight and Zhangzhou Pientzehuang

0.7

Correlation Coefficient

Ningxia Younglight  Zhangzhou Pientzehuang

Poor diversification

The 3 months correlation between Ningxia and Zhangzhou is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Zhangzhou Pientzehuang Pharmac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangzhou Pientzehuang and Ningxia Younglight 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 Ningxia Younglight Chemicals are associated (or correlated) with Zhangzhou Pientzehuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangzhou Pientzehuang has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Zhangzhou Pientzehuang go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Zhangzhou Pientzehuang

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to generate 1.88 times more return on investment than Zhangzhou Pientzehuang. However, Ningxia Younglight is 1.88 times more volatile than Zhangzhou Pientzehuang Pharmaceutical. It trades about 0.06 of its potential returns per unit of risk. Zhangzhou Pientzehuang Pharmaceutical is currently generating about -0.09 per unit of risk. If you would invest  787.00  in Ningxia Younglight Chemicals on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Ningxia Younglight Chemicals or generate 5.97% return on investment over 90 days.

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

Ningxia Younglight Chemicals  vs.  Zhangzhou Pientzehuang Pharmac

Ningxia Younglight

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Younglight Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Younglight may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zhangzhou Pientzehuang

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ningxia Younglight and Zhangzhou Pientzehuang

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

The idea behind Ningxia Younglight Chemicals and Zhangzhou Pientzehuang Pharmaceutical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.