Correlation Between Ningxia Younglight and UE Furniture

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

Diversification Opportunities for Ningxia Younglight and UE Furniture

0.05

Correlation Coefficient

Ningxia Younglight  UE Furniture

Significant diversification

The 3 months correlation between Ningxia and 603600 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture 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 UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and UE Furniture go up and down completely randomly.

Pair Corralation between Ningxia Younglight and UE Furniture

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to generate 1.47 times more return on investment than UE Furniture. However, Ningxia Younglight is 1.47 times more volatile than UE Furniture Co. It trades about 0.05 of its potential returns per unit of risk. UE Furniture Co is currently generating about 0.07 per unit of risk. If you would invest  700.00  in Ningxia Younglight Chemicals on October 24, 2024 and sell it today you would earn a total of  54.00  from holding Ningxia Younglight Chemicals or generate 7.71% 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.  UE Furniture Co

Ningxia Younglight

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Younglight Chemicals are ranked lower than 3 (%) 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 February 2025.

UE Furniture

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Ningxia Younglight and UE Furniture

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

The idea behind Ningxia Younglight Chemicals and UE Furniture Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.