Correlation Between Nanxing Furniture and IRay Technology

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

Diversification Opportunities for Nanxing Furniture and IRay Technology

-0.16

Correlation Coefficient

Nanxing Furniture  IRay Technology

Good diversification

The 3 months correlation between Nanxing and IRay is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nanxing Furniture Machinery and iRay Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRay Technology 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 IRay Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRay Technology has no effect on the direction of Nanxing Furniture i.e., Nanxing Furniture and IRay Technology go up and down completely randomly.

Pair Corralation between Nanxing Furniture and IRay Technology

Assuming the 90 days trading horizon Nanxing Furniture is expected to generate 1.18 times less return on investment than IRay Technology. But when comparing it to its historical volatility, Nanxing Furniture Machinery is 1.05 times less risky than IRay Technology. It trades about 0.07 of its potential returns per unit of risk. iRay Technology Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,912  in iRay Technology Co on October 24, 2024 and sell it today you would earn a total of  1,946  from holding iRay Technology Co or generate 21.84% return on investment over 90 days.

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

Nanxing Furniture Machinery  vs.  iRay Technology Co

Nanxing Furniture

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nanxing Furniture Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanxing Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iRay Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nanxing Furniture and IRay Technology

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

The idea behind Nanxing Furniture Machinery and iRay Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..