Correlation Between Nuode Investment and New China

Can any of the company-specific risk be diversified away by investing in both Nuode Investment and New China 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 New China 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 New China Life, you can compare the effects of market volatilities on Nuode Investment and New China 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 New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuode Investment and New China.

Diversification Opportunities for Nuode Investment and New China

0.66

Correlation Coefficient

Nuode Investment  New China

Poor diversification

The 3 months correlation between Nuode and New is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nuode Investment Co and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life 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 New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of Nuode Investment i.e., Nuode Investment and New China go up and down completely randomly.

Pair Corralation between Nuode Investment and New China

Assuming the 90 days trading horizon Nuode Investment is expected to generate 1.48 times less return on investment than New China. In addition to that, Nuode Investment is 1.23 times more volatile than New China Life. It trades about 0.08 of its total potential returns per unit of risk. New China Life is currently generating about 0.15 per unit of volatility. If you would invest  3,082  in New China Life on September 29, 2024 and sell it today you would earn a total of  1,977  from holding New China Life or generate 64.15% return on investment over 90 days.

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

Nuode Investment Co  vs.  New China Life

Nuode Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuode Investment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nuode Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

New China Life

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nuode Investment and New China

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

The idea behind Nuode Investment Co and New China Life 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..