Correlation Between NBTM New and Rongcheer Industrial

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

Diversification Opportunities for NBTM New and Rongcheer Industrial

0.47

Correlation Coefficient

NBTM New  Rongcheer Industrial

Very weak diversification

The 3 months correlation between NBTM and Rongcheer is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Rongcheer Industrial Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongcheer 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 Rongcheer Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongcheer Industrial has no effect on the direction of NBTM New i.e., NBTM New and Rongcheer Industrial go up and down completely randomly.

Pair Corralation between NBTM New and Rongcheer Industrial

Assuming the 90 days trading horizon NBTM New Materials is expected to generate 0.72 times more return on investment than Rongcheer Industrial. However, NBTM New Materials is 1.39 times less risky than Rongcheer Industrial. It trades about 0.05 of its potential returns per unit of risk. Rongcheer Industrial Technology is currently generating about 0.01 per unit of risk. If you would invest  917.00  in NBTM New Materials on October 4, 2024 and sell it today you would earn a total of  700.00  from holding NBTM New Materials or generate 76.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.37%
Values	Daily Returns

NBTM New Materials  vs.  Rongcheer Industrial Technolog

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 somewhat strong basic indicators, NBTM New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rongcheer Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongcheer Industrial Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NBTM New and Rongcheer Industrial

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

The idea behind NBTM New Materials and Rongcheer Industrial Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.