Correlation Between Hotai and Nien Made

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

By analyzing existing cross correlation between Hotai Motor Co and Nien Made Enterprise, you can compare the effects of market volatilities on Hotai and Nien Made 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 Hotai with a short position of Nien Made. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and Nien Made.

Diversification Opportunities for Hotai and Nien Made

0.88

Correlation Coefficient

Hotai  Nien Made

Very poor diversification

The 3 months correlation between Hotai and Nien is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and Nien Made Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nien Made Enterprise and Hotai 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 Hotai Motor Co are associated (or correlated) with Nien Made. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nien Made Enterprise has no effect on the direction of Hotai i.e., Hotai and Nien Made go up and down completely randomly.

Pair Corralation between Hotai and Nien Made

Assuming the 90 days trading horizon Hotai is expected to generate 5.95 times less return on investment than Nien Made. But when comparing it to its historical volatility, Hotai Motor Co is 1.3 times less risky than Nien Made. It trades about 0.01 of its potential returns per unit of risk. Nien Made Enterprise is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  32,000  in Nien Made Enterprise on October 4, 2024 and sell it today you would earn a total of  4,650  from holding Nien Made Enterprise or generate 14.53% return on investment over 90 days.

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

Hotai Motor Co  vs.  Nien Made Enterprise

Hotai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotai Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Nien Made Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nien Made Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hotai and Nien Made

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

The idea behind Hotai Motor Co and Nien Made Enterprise 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.