Correlation Between Nuode Investment and Xiamen Bank

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

By analyzing existing cross correlation between Nuode Investment Co and Xiamen Bank Co, you can compare the effects of market volatilities on Nuode Investment and Xiamen Bank 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 Nuode Investment with a short position of Xiamen Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuode Investment and Xiamen Bank.

Diversification Opportunities for Nuode Investment and Xiamen Bank

0.51

Correlation Coefficient

Nuode Investment  Xiamen Bank

Very weak diversification

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

Pair Corralation between Nuode Investment and Xiamen Bank

Assuming the 90 days trading horizon Nuode Investment Co is expected to under-perform the Xiamen Bank. In addition to that, Nuode Investment is 1.8 times more volatile than Xiamen Bank Co. It trades about -0.03 of its total potential returns per unit of risk. Xiamen Bank Co is currently generating about 0.03 per unit of volatility. If you would invest  566.00  in Xiamen Bank Co on December 24, 2024 and sell it today you would earn a total of  9.00  from holding Xiamen Bank Co or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Nuode Investment Co  vs.  Xiamen Bank Co

Nuode Investment

Risk-Adjusted Performance

Very Weak

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

Xiamen Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Bank Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiamen Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuode Investment and Xiamen Bank

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

The idea behind Nuode Investment Co and Xiamen Bank Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.