Correlation Between NBTM New and Sinosteel Luonai

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

Diversification Opportunities for NBTM New and Sinosteel Luonai

0.43

Correlation Coefficient

NBTM New  Sinosteel Luonai

Very weak diversification

The 3 months correlation between NBTM and Sinosteel is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat 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 Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of NBTM New i.e., NBTM New and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between NBTM New and Sinosteel Luonai

Assuming the 90 days trading horizon NBTM New Materials is expected to generate 1.73 times more return on investment than Sinosteel Luonai. However, NBTM New is 1.73 times more volatile than Sinosteel Luonai Materials. It trades about 0.09 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.32 per unit of risk. If you would invest  1,649  in NBTM New Materials on October 25, 2024 and sell it today you would earn a total of  73.00  from holding NBTM New Materials or generate 4.43% return on investment over 90 days.

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

NBTM New Materials  vs.  Sinosteel Luonai Materials

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.

Sinosteel Luonai Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinosteel Luonai 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.

Pair Trading with NBTM New and Sinosteel Luonai

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

The idea behind NBTM New Materials and Sinosteel Luonai Materials 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.