Correlation Between Shenzhen Noposion and Nantong Jiangshan

Can any of the company-specific risk be diversified away by investing in both Shenzhen Noposion and Nantong Jiangshan 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 Shenzhen Noposion and Nantong Jiangshan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Noposion Agrochemicals and Nantong Jiangshan Agrochemical, you can compare the effects of market volatilities on Shenzhen Noposion and Nantong Jiangshan 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 Shenzhen Noposion with a short position of Nantong Jiangshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Noposion and Nantong Jiangshan.

Diversification Opportunities for Shenzhen Noposion and Nantong Jiangshan

0.16

Correlation Coefficient

Shenzhen Noposion  Nantong Jiangshan

Average diversification

The 3 months correlation between Shenzhen and Nantong is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Noposion Agrochemical and Nantong Jiangshan Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Jiangshan and Shenzhen Noposion 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 Shenzhen Noposion Agrochemicals are associated (or correlated) with Nantong Jiangshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Jiangshan has no effect on the direction of Shenzhen Noposion i.e., Shenzhen Noposion and Nantong Jiangshan go up and down completely randomly.

Pair Corralation between Shenzhen Noposion and Nantong Jiangshan

Assuming the 90 days trading horizon Shenzhen Noposion Agrochemicals is expected to under-perform the Nantong Jiangshan. In addition to that, Shenzhen Noposion is 2.04 times more volatile than Nantong Jiangshan Agrochemical. It trades about -0.19 of its total potential returns per unit of risk. Nantong Jiangshan Agrochemical is currently generating about -0.09 per unit of volatility. If you would invest  1,485  in Nantong Jiangshan Agrochemical on October 23, 2024 and sell it today you would lose (45.00) from holding Nantong Jiangshan Agrochemical or give up 3.03% of portfolio value over 90 days.

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

Shenzhen Noposion Agrochemical  vs.  Nantong Jiangshan Agrochemical

Shenzhen Noposion

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nantong Jiangshan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Jiangshan Agrochemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nantong Jiangshan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Noposion and Nantong Jiangshan

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

The idea behind Shenzhen Noposion Agrochemicals and Nantong Jiangshan Agrochemical 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.