Correlation Between NBTM New and AVIC UAS

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

Diversification Opportunities for NBTM New and AVIC UAS

0.67

Correlation Coefficient

NBTM New  AVIC UAS

Poor diversification

The 3 months correlation between NBTM and AVIC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC UAS 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 AVIC UAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC UAS has no effect on the direction of NBTM New i.e., NBTM New and AVIC UAS go up and down completely randomly.

Pair Corralation between NBTM New and AVIC UAS

Assuming the 90 days trading horizon NBTM New Materials is expected to under-perform the AVIC UAS. But the stock apears to be less risky and, when comparing its historical volatility, NBTM New Materials is 1.51 times less risky than AVIC UAS. The stock trades about -0.08 of its potential returns per unit of risk. The AVIC UAS Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,645  in AVIC UAS Co on October 22, 2024 and sell it today you would lose (799.00) from holding AVIC UAS Co or give up 17.2% of portfolio value over 90 days.

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

NBTM New Materials  vs.  AVIC UAS Co

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 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.

AVIC UAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVIC UAS Co 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 AVIC UAS

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

The idea behind NBTM New Materials and AVIC UAS Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.