Correlation Between Ningxia Building and UE Furniture

Can any of the company-specific risk be diversified away by investing in both Ningxia Building and UE Furniture 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 Ningxia Building and UE Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningxia Building Materials and UE Furniture Co, you can compare the effects of market volatilities on Ningxia Building and UE Furniture 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 Ningxia Building with a short position of UE Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Building and UE Furniture.

Diversification Opportunities for Ningxia Building and UE Furniture

0.19

Correlation Coefficient

Ningxia Building  UE Furniture

Average diversification

The 3 months correlation between Ningxia and 603600 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Building Materials and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture and Ningxia Building 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 Ningxia Building Materials are associated (or correlated) with UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Ningxia Building i.e., Ningxia Building and UE Furniture go up and down completely randomly.

Pair Corralation between Ningxia Building and UE Furniture

Assuming the 90 days trading horizon Ningxia Building Materials is expected to under-perform the UE Furniture. In addition to that, Ningxia Building is 1.24 times more volatile than UE Furniture Co. It trades about -0.17 of its total potential returns per unit of risk. UE Furniture Co is currently generating about 0.06 per unit of volatility. If you would invest  1,183  in UE Furniture Co on October 11, 2024 and sell it today you would earn a total of  34.00  from holding UE Furniture Co or generate 2.87% return on investment over 90 days.

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

Ningxia Building Materials  vs.  UE Furniture Co

Ningxia Building Mat

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building sustained solid returns over the last few months and may actually be approaching a breakup point.

UE Furniture

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UE Furniture Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UE Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ningxia Building and UE Furniture

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

The idea behind Ningxia Building Materials and UE Furniture 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.