Correlation Between Northking Information and Huaibei Mining

Can any of the company-specific risk be diversified away by investing in both Northking Information and Huaibei Mining 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 Northking Information and Huaibei Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northking Information Technology and Huaibei Mining Holdings, you can compare the effects of market volatilities on Northking Information and Huaibei Mining 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 Northking Information with a short position of Huaibei Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northking Information and Huaibei Mining.

Diversification Opportunities for Northking Information and Huaibei Mining

0.53

Correlation Coefficient

Northking Information  Huaibei Mining

Very weak diversification

The 3 months correlation between Northking and Huaibei is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Northking Information Technolo and Huaibei Mining Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaibei Mining Holdings and Northking Information 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 Northking Information Technology are associated (or correlated) with Huaibei Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaibei Mining Holdings has no effect on the direction of Northking Information i.e., Northking Information and Huaibei Mining go up and down completely randomly.

Pair Corralation between Northking Information and Huaibei Mining

Assuming the 90 days trading horizon Northking Information Technology is expected to generate 1.56 times more return on investment than Huaibei Mining. However, Northking Information is 1.56 times more volatile than Huaibei Mining Holdings. It trades about 0.15 of its potential returns per unit of risk. Huaibei Mining Holdings is currently generating about 0.0 per unit of risk. If you would invest  941.00  in Northking Information Technology on September 21, 2024 and sell it today you would earn a total of  596.00  from holding Northking Information Technology or generate 63.34% return on investment over 90 days.

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

Northking Information Technolo  vs.  Huaibei Mining Holdings

Northking Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northking Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Huaibei Mining Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Northking Information and Huaibei Mining

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

The idea behind Northking Information Technology and Huaibei Mining Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.