Correlation Between Elite Color and Ningxia Younglight

Can any of the company-specific risk be diversified away by investing in both Elite Color and Ningxia Younglight 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 Elite Color and Ningxia Younglight into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Color Environmental and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Elite Color and Ningxia Younglight 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 Elite Color with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Ningxia Younglight.

Diversification Opportunities for Elite Color and Ningxia Younglight

0.62

Correlation Coefficient

Elite Color  Ningxia Younglight

Poor diversification

The 3 months correlation between Elite and Ningxia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Elite Color 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 Elite Color Environmental are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Elite Color i.e., Elite Color and Ningxia Younglight go up and down completely randomly.

Pair Corralation between Elite Color and Ningxia Younglight

Assuming the 90 days trading horizon Elite Color Environmental is expected to under-perform the Ningxia Younglight. But the stock apears to be less risky and, when comparing its historical volatility, Elite Color Environmental is 1.37 times less risky than Ningxia Younglight. The stock trades about 0.0 of its potential returns per unit of risk. The Ningxia Younglight Chemicals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  960.00  in Ningxia Younglight Chemicals on October 5, 2024 and sell it today you would lose (191.00) from holding Ningxia Younglight Chemicals or give up 19.9% of portfolio value over 90 days.

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

Elite Color Environmental  vs.  Ningxia Younglight Chemicals

Elite Color Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ningxia Younglight

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Younglight Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Younglight may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Elite Color and Ningxia Younglight

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

The idea behind Elite Color Environmental and Ningxia Younglight Chemicals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.