Correlation Between Ningxia Younglight and CSSC Offshore

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

Diversification Opportunities for Ningxia Younglight and CSSC Offshore

0.42

Correlation Coefficient

Ningxia Younglight  CSSC Offshore

Very weak diversification

The 3 months correlation between Ningxia and CSSC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and CSSC Offshore go up and down completely randomly.

Pair Corralation between Ningxia Younglight and CSSC Offshore

Assuming the 90 days trading horizon Ningxia Younglight is expected to generate 2.03 times less return on investment than CSSC Offshore. In addition to that, Ningxia Younglight is 1.33 times more volatile than CSSC Offshore Marine. It trades about 0.0 of its total potential returns per unit of risk. CSSC Offshore Marine is currently generating about 0.01 per unit of volatility. If you would invest  2,261  in CSSC Offshore Marine on October 18, 2024 and sell it today you would earn a total of  15.00  from holding CSSC Offshore Marine or generate 0.66% return on investment over 90 days.

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

Ningxia Younglight Chemicals  vs.  CSSC Offshore Marine

Ningxia Younglight

Risk-Adjusted Performance

5 of 100

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSSC Offshore Marine 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.

Pair Trading with Ningxia Younglight and CSSC Offshore

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

The idea behind Ningxia Younglight Chemicals and CSSC Offshore Marine 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.