Correlation Between Contemporary Amperex and Nanxing Furniture

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Can any of the company-specific risk be diversified away by investing in both Contemporary Amperex and Nanxing Furniture 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 Contemporary Amperex and Nanxing Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Contemporary Amperex Technology and Nanxing Furniture Machinery, you can compare the effects of market volatilities on Contemporary Amperex and Nanxing Furniture 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 Contemporary Amperex with a short position of Nanxing Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contemporary Amperex and Nanxing Furniture.

Diversification Opportunities for Contemporary Amperex and Nanxing Furniture

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Contemporary and Nanxing is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Contemporary Amperex Technolog and Nanxing Furniture Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanxing Furniture and Contemporary Amperex 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 Contemporary Amperex Technology are associated (or correlated) with Nanxing Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanxing Furniture has no effect on the direction of Contemporary Amperex i.e., Contemporary Amperex and Nanxing Furniture go up and down completely randomly.

Pair Corralation between Contemporary Amperex and Nanxing Furniture

Assuming the 90 days trading horizon Contemporary Amperex Technology is expected to generate 0.5 times more return on investment than Nanxing Furniture. However, Contemporary Amperex Technology is 2.0 times less risky than Nanxing Furniture. It trades about -0.12 of its potential returns per unit of risk. Nanxing Furniture Machinery is currently generating about -0.22 per unit of risk. If you would invest  26,805  in Contemporary Amperex Technology on October 8, 2024 and sell it today you would lose (1,042) from holding Contemporary Amperex Technology or give up 3.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Contemporary Amperex Technolog  vs.  Nanxing Furniture Machinery

 Performance 
       Timeline  
Contemporary Amperex 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Contemporary Amperex Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Nanxing Furniture 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nanxing Furniture Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nanxing Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Contemporary Amperex and Nanxing Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Contemporary Amperex and Nanxing Furniture

The main advantage of trading using opposite Contemporary Amperex and Nanxing Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contemporary Amperex position performs unexpectedly, Nanxing Furniture 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 Nanxing Furniture will offset losses from the drop in Nanxing Furniture's long position.
The idea behind Contemporary Amperex Technology and Nanxing Furniture Machinery 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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