Correlation Between Nanjing Putian and Nanjing OLO

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

Diversification Opportunities for Nanjing Putian and Nanjing OLO

NanjingNanjingDiversified AwayNanjingNanjingDiversified Away100%
0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nanjing and Nanjing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home 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 Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Nanjing OLO go up and down completely randomly.

Pair Corralation between Nanjing Putian and Nanjing OLO

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 1.33 times more return on investment than Nanjing OLO. However, Nanjing Putian is 1.33 times more volatile than Nanjing OLO Home. It trades about 0.3 of its potential returns per unit of risk. Nanjing OLO Home is currently generating about 0.11 per unit of risk. If you would invest  197.00  in Nanjing Putian Telecommunications on September 24, 2024 and sell it today you would earn a total of  231.00  from holding Nanjing Putian Telecommunications or generate 117.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nanjing Putian Telecommunicati  vs.  Nanjing OLO Home

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 050100150
JavaScript chart by amCharts 3.21.15200468 603326
       Timeline  
Nanjing Putian Telec 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 23 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec22.533.544.55
Nanjing OLO Home 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing OLO Home are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing OLO sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec5.566.577.58

Nanjing Putian and Nanjing OLO Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.36-10.0-6.65-3.30.03.747.6211.4915.3619.23 0.0100.0150.0200.0250.0300.035
JavaScript chart by amCharts 3.21.15200468 603326
       Returns  

Pair Trading with Nanjing Putian and Nanjing OLO

The main advantage of trading using opposite Nanjing Putian and Nanjing OLO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nanjing Putian position performs unexpectedly, Nanjing OLO 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 Nanjing OLO will offset losses from the drop in Nanjing OLO's long position.
The idea behind Nanjing Putian Telecommunications and Nanjing OLO Home 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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