Correlation Between Nanjing Putian and Luzhou Lao

Can any of the company-specific risk be diversified away by investing in both Nanjing Putian and Luzhou Lao 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 Nanjing Putian and Luzhou Lao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Luzhou Lao Jiao, you can compare the effects of market volatilities on Nanjing Putian and Luzhou Lao 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 Nanjing Putian with a short position of Luzhou Lao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Luzhou Lao.

Diversification Opportunities for Nanjing Putian and Luzhou Lao

0.73

Correlation Coefficient

Nanjing Putian  Luzhou Lao

Poor diversification

The 3 months correlation between Nanjing and Luzhou is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Luzhou Lao Jiao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luzhou Lao Jiao and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Luzhou Lao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luzhou Lao Jiao has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Luzhou Lao go up and down completely randomly.

Pair Corralation between Nanjing Putian and Luzhou Lao

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 2.04 times more return on investment than Luzhou Lao. However, Nanjing Putian is 2.04 times more volatile than Luzhou Lao Jiao. It trades about 0.05 of its potential returns per unit of risk. Luzhou Lao Jiao is currently generating about -0.1 per unit of risk. If you would invest  362.00  in Nanjing Putian Telecommunications on October 24, 2024 and sell it today you would earn a total of  27.00  from holding Nanjing Putian Telecommunications or generate 7.46% return on investment over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Luzhou Lao Jiao

Nanjing Putian Telec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Luzhou Lao Jiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luzhou Lao Jiao has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nanjing Putian and Luzhou Lao

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

The idea behind Nanjing Putian Telecommunications and Luzhou Lao Jiao 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.