Correlation Between Nanjing Putian and Anhui Estone

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

Diversification Opportunities for Nanjing Putian and Anhui Estone

0.3

Correlation Coefficient

Nanjing Putian  Anhui Estone

Weak diversification

The 3 months correlation between Nanjing and Anhui is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Anhui Estone Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Estone Materials 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 Anhui Estone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Estone Materials has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Anhui Estone go up and down completely randomly.

Pair Corralation between Nanjing Putian and Anhui Estone

Assuming the 90 days trading horizon Nanjing Putian is expected to generate 1.29 times less return on investment than Anhui Estone. But when comparing it to its historical volatility, Nanjing Putian Telecommunications is 1.06 times less risky than Anhui Estone. It trades about 0.02 of its potential returns per unit of risk. Anhui Estone Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,877  in Anhui Estone Materials on October 26, 2024 and sell it today you would lose (17.00) from holding Anhui Estone Materials or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Nanjing Putian Telecommunicati  vs.  Anhui Estone Materials

Nanjing Putian Telec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nanjing Putian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Estone Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Estone Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Estone is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nanjing Putian and Anhui Estone

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

The idea behind Nanjing Putian Telecommunications and Anhui Estone Materials 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.