Correlation Between NBTM New and Hunan Nanling

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

Diversification Opportunities for NBTM New and Hunan Nanling

-0.13

Correlation Coefficient

NBTM New  Hunan Nanling

Good diversification

The 3 months correlation between NBTM and Hunan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Hunan Nanling Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Nanling Industrial 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 Hunan Nanling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Nanling Industrial has no effect on the direction of NBTM New i.e., NBTM New and Hunan Nanling go up and down completely randomly.

Pair Corralation between NBTM New and Hunan Nanling

Assuming the 90 days trading horizon NBTM New Materials is expected to generate 2.04 times more return on investment than Hunan Nanling. However, NBTM New is 2.04 times more volatile than Hunan Nanling Industrial. It trades about 0.11 of its potential returns per unit of risk. Hunan Nanling Industrial is currently generating about -0.08 per unit of risk. If you would invest  1,649  in NBTM New Materials on December 24, 2024 and sell it today you would earn a total of  343.00  from holding NBTM New Materials or generate 20.8% return on investment over 90 days.

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

NBTM New Materials  vs.  Hunan Nanling Industrial

NBTM New Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NBTM New Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBTM New sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Nanling Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hunan Nanling Industrial 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.

Pair Trading with NBTM New and Hunan Nanling

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

The idea behind NBTM New Materials and Hunan Nanling Industrial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.