Correlation Between President Chain and Nan Liu

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

By analyzing existing cross correlation between President Chain Store and Nan Liu Enterprise, you can compare the effects of market volatilities on President Chain and Nan Liu 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 President Chain with a short position of Nan Liu. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Nan Liu.

Diversification Opportunities for President Chain and Nan Liu

0.65

Correlation Coefficient

President Chain  Nan Liu

Poor diversification

The 3 months correlation between President and Nan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Nan Liu Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Liu Enterprise and President Chain 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 President Chain Store are associated (or correlated) with Nan Liu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Liu Enterprise has no effect on the direction of President Chain i.e., President Chain and Nan Liu go up and down completely randomly.

Pair Corralation between President Chain and Nan Liu

Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Nan Liu. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 1.39 times less risky than Nan Liu. The stock trades about -0.16 of its potential returns per unit of risk. The Nan Liu Enterprise is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7,030  in Nan Liu Enterprise on October 10, 2024 and sell it today you would lose (500.00) from holding Nan Liu Enterprise or give up 7.11% of portfolio value over 90 days.

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

President Chain Store  vs.  Nan Liu Enterprise

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store 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.

Nan Liu Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nan Liu Enterprise 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.

Pair Trading with President Chain and Nan Liu

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

The idea behind President Chain Store and Nan Liu 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.