Correlation Between NBTM New and Shaanxi Meineng

Can any of the company-specific risk be diversified away by investing in both NBTM New and Shaanxi Meineng 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 NBTM New and Shaanxi Meineng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NBTM New Materials and Shaanxi Meineng Clean, you can compare the effects of market volatilities on NBTM New and Shaanxi Meineng 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 NBTM New with a short position of Shaanxi Meineng. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBTM New and Shaanxi Meineng.

Diversification Opportunities for NBTM New and Shaanxi Meineng

0.37

Correlation Coefficient

NBTM New  Shaanxi Meineng

Weak diversification

The 3 months correlation between NBTM and Shaanxi is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Shaanxi Meineng Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Meineng Clean and NBTM New 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 NBTM New Materials are associated (or correlated) with Shaanxi Meineng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Meineng Clean has no effect on the direction of NBTM New i.e., NBTM New and Shaanxi Meineng go up and down completely randomly.

Pair Corralation between NBTM New and Shaanxi Meineng

Assuming the 90 days trading horizon NBTM New is expected to generate 1.23 times less return on investment than Shaanxi Meineng. In addition to that, NBTM New is 1.13 times more volatile than Shaanxi Meineng Clean. It trades about 0.04 of its total potential returns per unit of risk. Shaanxi Meineng Clean is currently generating about 0.05 per unit of volatility. If you would invest  1,245  in Shaanxi Meineng Clean on October 23, 2024 and sell it today you would earn a total of  23.00  from holding Shaanxi Meineng Clean or generate 1.85% return on investment over 90 days.

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

NBTM New Materials  vs.  Shaanxi Meineng Clean

NBTM New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBTM New Materials 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.

Shaanxi Meineng Clean

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Meineng Clean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shaanxi Meineng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NBTM New and Shaanxi Meineng

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

The idea behind NBTM New Materials and Shaanxi Meineng Clean 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.