Correlation Between Nanxing Furniture and Duzhe Publishing

Can any of the company-specific risk be diversified away by investing in both Nanxing Furniture and Duzhe Publishing 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 Nanxing Furniture and Duzhe Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanxing Furniture Machinery and Duzhe Publishing Media, you can compare the effects of market volatilities on Nanxing Furniture and Duzhe Publishing 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 Nanxing Furniture with a short position of Duzhe Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanxing Furniture and Duzhe Publishing.

Diversification Opportunities for Nanxing Furniture and Duzhe Publishing

0.44

Correlation Coefficient

Nanxing Furniture  Duzhe Publishing

Very weak diversification

The 3 months correlation between Nanxing and Duzhe is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nanxing Furniture Machinery and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe Publishing Media and Nanxing Furniture 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 Nanxing Furniture Machinery are associated (or correlated) with Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of Nanxing Furniture i.e., Nanxing Furniture and Duzhe Publishing go up and down completely randomly.

Pair Corralation between Nanxing Furniture and Duzhe Publishing

Assuming the 90 days trading horizon Nanxing Furniture Machinery is expected to generate 0.85 times more return on investment than Duzhe Publishing. However, Nanxing Furniture Machinery is 1.18 times less risky than Duzhe Publishing. It trades about -0.19 of its potential returns per unit of risk. Duzhe Publishing Media is currently generating about -0.17 per unit of risk. If you would invest  1,694  in Nanxing Furniture Machinery on October 11, 2024 and sell it today you would lose (229.00) from holding Nanxing Furniture Machinery or give up 13.52% of portfolio value over 90 days.

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

Nanxing Furniture Machinery  vs.  Duzhe Publishing Media

Nanxing Furniture

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nanxing Furniture Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanxing Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Duzhe Publishing Media

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Nanxing Furniture and Duzhe Publishing

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

The idea behind Nanxing Furniture Machinery and Duzhe Publishing Media 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.