Correlation Between Yuan Longping and Niutech Environment

Can any of the company-specific risk be diversified away by investing in both Yuan Longping and Niutech Environment 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 Yuan Longping and Niutech Environment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuan Longping High tech and Niutech Environment Technology, you can compare the effects of market volatilities on Yuan Longping and Niutech Environment 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 Yuan Longping with a short position of Niutech Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Longping and Niutech Environment.

Diversification Opportunities for Yuan Longping and Niutech Environment

0.62

Correlation Coefficient

Yuan Longping  Niutech Environment

Poor diversification

The 3 months correlation between Yuan and Niutech is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Longping High tech and Niutech Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niutech Environment and Yuan Longping 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 Yuan Longping High tech are associated (or correlated) with Niutech Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niutech Environment has no effect on the direction of Yuan Longping i.e., Yuan Longping and Niutech Environment go up and down completely randomly.

Pair Corralation between Yuan Longping and Niutech Environment

Assuming the 90 days trading horizon Yuan Longping High tech is expected to under-perform the Niutech Environment. But the stock apears to be less risky and, when comparing its historical volatility, Yuan Longping High tech is 1.55 times less risky than Niutech Environment. The stock trades about -0.04 of its potential returns per unit of risk. The Niutech Environment Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,240  in Niutech Environment Technology on December 7, 2024 and sell it today you would lose (738.00) from holding Niutech Environment Technology or give up 32.95% of portfolio value over 90 days.

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

Yuan Longping High tech  vs.  Niutech Environment Technology

Yuan Longping High

Risk-Adjusted Performance

Very Weak

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

Niutech Environment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Niutech Environment Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Niutech Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yuan Longping and Niutech Environment

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

The idea behind Yuan Longping High tech and Niutech Environment Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.