Correlation Between Shandong Polymer and Ningxia Younglight

Can any of the company-specific risk be diversified away by investing in both Shandong Polymer and Ningxia Younglight 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 Shandong Polymer and Ningxia Younglight into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Polymer Biochemicals and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Shandong Polymer and Ningxia Younglight 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 Shandong Polymer with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Polymer and Ningxia Younglight.

Diversification Opportunities for Shandong Polymer and Ningxia Younglight

0.67

Correlation Coefficient

Shandong Polymer  Ningxia Younglight

Poor diversification

The 3 months correlation between Shandong and Ningxia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Shandong Polymer 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 Shandong Polymer Biochemicals are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and Ningxia Younglight go up and down completely randomly.

Pair Corralation between Shandong Polymer and Ningxia Younglight

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to generate 0.73 times more return on investment than Ningxia Younglight. However, Shandong Polymer Biochemicals is 1.37 times less risky than Ningxia Younglight. It trades about -0.06 of its potential returns per unit of risk. Ningxia Younglight Chemicals is currently generating about -0.06 per unit of risk. If you would invest  479.00  in Shandong Polymer Biochemicals on December 2, 2024 and sell it today you would lose (43.00) from holding Shandong Polymer Biochemicals or give up 8.98% of portfolio value over 90 days.

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

Shandong Polymer Biochemicals  vs.  Ningxia Younglight Chemicals

Shandong Polymer Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Polymer Biochemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ningxia Younglight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Younglight Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong Polymer and Ningxia Younglight

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

The idea behind Shandong Polymer Biochemicals and Ningxia Younglight Chemicals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.