Correlation Between Nan Pao and Jinan Acetate

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

By analyzing existing cross correlation between Nan Pao Resins and Jinan Acetate Chemical, you can compare the effects of market volatilities on Nan Pao and Jinan Acetate 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 Nan Pao with a short position of Jinan Acetate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Pao and Jinan Acetate.

Diversification Opportunities for Nan Pao and Jinan Acetate

0.33

Correlation Coefficient

Nan Pao  Jinan Acetate

Weak diversification

The 3 months correlation between Nan and Jinan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins and Jinan Acetate Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinan Acetate Chemical and Nan Pao 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 Nan Pao Resins are associated (or correlated) with Jinan Acetate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinan Acetate Chemical has no effect on the direction of Nan Pao i.e., Nan Pao and Jinan Acetate go up and down completely randomly.

Pair Corralation between Nan Pao and Jinan Acetate

Assuming the 90 days trading horizon Nan Pao Resins is expected to generate 1.06 times more return on investment than Jinan Acetate. However, Nan Pao is 1.06 times more volatile than Jinan Acetate Chemical. It trades about 0.11 of its potential returns per unit of risk. Jinan Acetate Chemical is currently generating about -0.02 per unit of risk. If you would invest  29,000  in Nan Pao Resins on October 25, 2024 and sell it today you would earn a total of  3,400  from holding Nan Pao Resins or generate 11.72% return on investment over 90 days.

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

Nan Pao Resins  vs.  Jinan Acetate Chemical

Nan Pao Resins

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Pao Resins are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nan Pao may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jinan Acetate Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinan Acetate Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Jinan Acetate is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nan Pao and Jinan Acetate

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

The idea behind Nan Pao Resins and Jinan Acetate Chemical 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.