Correlation Between Daoming OpticsChemical and NBTM New

Can any of the company-specific risk be diversified away by investing in both Daoming OpticsChemical and NBTM New 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 Daoming OpticsChemical and NBTM New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daoming OpticsChemical Co and NBTM New Materials, you can compare the effects of market volatilities on Daoming OpticsChemical and NBTM New 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 Daoming OpticsChemical with a short position of NBTM New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daoming OpticsChemical and NBTM New.

Diversification Opportunities for Daoming OpticsChemical and NBTM New

0.69

Correlation Coefficient

Daoming OpticsChemical  NBTM New

Poor diversification

The 3 months correlation between Daoming and NBTM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Daoming OpticsChemical Co and NBTM New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBTM New Materials and Daoming OpticsChemical 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 Daoming OpticsChemical Co are associated (or correlated) with NBTM New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBTM New Materials has no effect on the direction of Daoming OpticsChemical i.e., Daoming OpticsChemical and NBTM New go up and down completely randomly.

Pair Corralation between Daoming OpticsChemical and NBTM New

Assuming the 90 days trading horizon Daoming OpticsChemical Co is expected to under-perform the NBTM New. But the stock apears to be less risky and, when comparing its historical volatility, Daoming OpticsChemical Co is 1.13 times less risky than NBTM New. The stock trades about -0.01 of its potential returns per unit of risk. The NBTM New Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,706  in NBTM New Materials on December 27, 2024 and sell it today you would earn a total of  254.00  from holding NBTM New Materials or generate 14.89% return on investment over 90 days.

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

Daoming OpticsChemical Co  vs.  NBTM New Materials

Daoming OpticsChemical

Risk-Adjusted Performance

Very Weak

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

NBTM New Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NBTM New Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBTM New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daoming OpticsChemical and NBTM New

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

The idea behind Daoming OpticsChemical Co and NBTM New Materials 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.