Correlation Between NBTM New and HeBei Jinniu

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

Diversification Opportunities for NBTM New and HeBei Jinniu

-0.38

Correlation Coefficient

NBTM New  HeBei Jinniu

Very good diversification

The 3 months correlation between NBTM and HeBei is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of NBTM New i.e., NBTM New and HeBei Jinniu go up and down completely randomly.

Pair Corralation between NBTM New and HeBei Jinniu

Assuming the 90 days trading horizon NBTM New Materials is expected to under-perform the HeBei Jinniu. But the stock apears to be less risky and, when comparing its historical volatility, NBTM New Materials is 1.26 times less risky than HeBei Jinniu. The stock trades about -0.05 of its potential returns per unit of risk. The HeBei Jinniu Chemical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  424.00  in HeBei Jinniu Chemical on October 20, 2024 and sell it today you would earn a total of  126.00  from holding HeBei Jinniu Chemical or generate 29.72% return on investment over 90 days.

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

NBTM New Materials  vs.  HeBei Jinniu Chemical

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.

HeBei Jinniu Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NBTM New and HeBei Jinniu

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

The idea behind NBTM New Materials and HeBei Jinniu Chemical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.