Correlation Between Nanjing Putian and Huagong Tech

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

Diversification Opportunities for Nanjing Putian and Huagong Tech

0.5

Correlation Coefficient

Nanjing Putian  Huagong Tech

Very weak diversification

The 3 months correlation between Nanjing and Huagong is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Huagong Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huagong Tech 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 Huagong Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huagong Tech has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Huagong Tech go up and down completely randomly.

Pair Corralation between Nanjing Putian and Huagong Tech

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 1.37 times more return on investment than Huagong Tech. However, Nanjing Putian is 1.37 times more volatile than Huagong Tech Co. It trades about 0.04 of its potential returns per unit of risk. Huagong Tech Co is currently generating about 0.04 per unit of risk. If you would invest  281.00  in Nanjing Putian Telecommunications on October 5, 2024 and sell it today you would earn a total of  59.00  from holding Nanjing Putian Telecommunications or generate 21.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.67%
Values	Daily Returns

Nanjing Putian Telecommunicati  vs.  Huagong Tech Co

Nanjing Putian Telec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 11 (%) 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.

Huagong Tech

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Nanjing Putian and Huagong Tech

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

The idea behind Nanjing Putian Telecommunications and Huagong Tech 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 Transaction History module to view history of all your transactions and understand their impact on performance.