Correlation Between Ningxia Younglight and Epoxy Base

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

Diversification Opportunities for Ningxia Younglight and Epoxy Base

0.13

Correlation Coefficient

Ningxia Younglight  Epoxy Base

Average diversification

The 3 months correlation between Ningxia and Epoxy is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Epoxy Base Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epoxy Base Electronic 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 Epoxy Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epoxy Base Electronic has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Epoxy Base go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Epoxy Base

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to under-perform the Epoxy Base. But the stock apears to be less risky and, when comparing its historical volatility, Ningxia Younglight Chemicals is 1.17 times less risky than Epoxy Base. The stock trades about -0.02 of its potential returns per unit of risk. The Epoxy Base Electronic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  538.00  in Epoxy Base Electronic on October 26, 2024 and sell it today you would earn a total of  25.00  from holding Epoxy Base Electronic or generate 4.65% return on investment over 90 days.

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

Ningxia Younglight Chemicals  vs.  Epoxy Base Electronic

Ningxia Younglight

Risk-Adjusted Performance

0 of 100

Weak

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

Epoxy Base Electronic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Epoxy Base Electronic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Epoxy Base may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ningxia Younglight and Epoxy Base

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

The idea behind Ningxia Younglight Chemicals and Epoxy Base Electronic 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.