Correlation Between NBTM New and Sinocat Environmental

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

Diversification Opportunities for NBTM New and Sinocat Environmental

0.02

Correlation Coefficient

NBTM New  Sinocat Environmental

Significant diversification

The 3 months correlation between NBTM and Sinocat is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding NBTM New Materials and Sinocat Environmental Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocat Environmental 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 Sinocat Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocat Environmental has no effect on the direction of NBTM New i.e., NBTM New and Sinocat Environmental go up and down completely randomly.

Pair Corralation between NBTM New and Sinocat Environmental

Assuming the 90 days trading horizon NBTM New Materials is expected to under-perform the Sinocat Environmental. But the stock apears to be less risky and, when comparing its historical volatility, NBTM New Materials is 1.3 times less risky than Sinocat Environmental. The stock trades about -0.02 of its potential returns per unit of risk. The Sinocat Environmental Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,783  in Sinocat Environmental Technology on October 4, 2024 and sell it today you would lose (2.00) from holding Sinocat Environmental Technology or give up 0.11% of portfolio value over 90 days.

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

NBTM New Materials  vs.  Sinocat Environmental Technolo

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.

Sinocat Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinocat Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NBTM New and Sinocat Environmental

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

The idea behind NBTM New Materials and Sinocat Environmental 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.