Correlation Between Shenzhen Noposion and Yangmei Chemical

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

Diversification Opportunities for Shenzhen Noposion and Yangmei Chemical

0.85

Correlation Coefficient

Shenzhen Noposion  Yangmei Chemical

Very poor diversification

The 3 months correlation between Shenzhen and Yangmei is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Noposion Agrochemical and Yangmei Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yangmei Chemical 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 Yangmei Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yangmei Chemical has no effect on the direction of Shenzhen Noposion i.e., Shenzhen Noposion and Yangmei Chemical go up and down completely randomly.

Pair Corralation between Shenzhen Noposion and Yangmei Chemical

Assuming the 90 days trading horizon Shenzhen Noposion Agrochemicals is expected to generate 0.73 times more return on investment than Yangmei Chemical. However, Shenzhen Noposion Agrochemicals is 1.37 times less risky than Yangmei Chemical. It trades about 0.34 of its potential returns per unit of risk. Yangmei Chemical Co is currently generating about 0.0 per unit of risk. If you would invest  960.00  in Shenzhen Noposion Agrochemicals on September 21, 2024 and sell it today you would earn a total of  211.00  from holding Shenzhen Noposion Agrochemicals or generate 21.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Shenzhen Noposion Agrochemical  vs.  Yangmei Chemical Co

Shenzhen Noposion

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion sustained solid returns over the last few months and may actually be approaching a breakup point.

Yangmei Chemical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yangmei Chemical Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yangmei Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Noposion and Yangmei Chemical

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

The idea behind Shenzhen Noposion Agrochemicals and Yangmei Chemical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.