Correlation Between Der International and Nanjing OLO

Can any of the company-specific risk be diversified away by investing in both Der International and Nanjing OLO 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 Der International and Nanjing OLO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Der International Home and Nanjing OLO Home, you can compare the effects of market volatilities on Der International and Nanjing OLO 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 Der International with a short position of Nanjing OLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Der International and Nanjing OLO.

Diversification Opportunities for Der International and Nanjing OLO

0.87

Correlation Coefficient

Der International  Nanjing OLO

Very poor diversification

The 3 months correlation between Der and Nanjing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Der International Home and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home and Der International 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 Der International Home are associated (or correlated) with Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Der International i.e., Der International and Nanjing OLO go up and down completely randomly.

Pair Corralation between Der International and Nanjing OLO

Assuming the 90 days trading horizon Der International Home is expected to under-perform the Nanjing OLO. In addition to that, Der International is 1.31 times more volatile than Nanjing OLO Home. It trades about -0.03 of its total potential returns per unit of risk. Nanjing OLO Home is currently generating about 0.01 per unit of volatility. If you would invest  610.00  in Nanjing OLO Home on October 21, 2024 and sell it today you would lose (3.00) from holding Nanjing OLO Home or give up 0.49% of portfolio value over 90 days.

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

Der International Home  vs.  Nanjing OLO Home

Der International Home

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nanjing OLO Home

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Der International and Nanjing OLO

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

The idea behind Der International Home and Nanjing OLO Home 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.