Correlation Between HeBei Jinniu and Shenzhen Noposion

Can any of the company-specific risk be diversified away by investing in both HeBei Jinniu and Shenzhen Noposion 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 HeBei Jinniu and Shenzhen Noposion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HeBei Jinniu Chemical and Shenzhen Noposion Agrochemicals, you can compare the effects of market volatilities on HeBei Jinniu and Shenzhen Noposion 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 HeBei Jinniu with a short position of Shenzhen Noposion. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeBei Jinniu and Shenzhen Noposion.

Diversification Opportunities for HeBei Jinniu and Shenzhen Noposion

0.77

Correlation Coefficient

HeBei Jinniu  Shenzhen Noposion

Poor diversification

The 3 months correlation between HeBei and Shenzhen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HeBei Jinniu Chemical and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and HeBei Jinniu 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 HeBei Jinniu Chemical are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of HeBei Jinniu i.e., HeBei Jinniu and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between HeBei Jinniu and Shenzhen Noposion

Assuming the 90 days trading horizon HeBei Jinniu is expected to generate 2.93 times less return on investment than Shenzhen Noposion. In addition to that, HeBei Jinniu is 1.29 times more volatile than Shenzhen Noposion Agrochemicals. It trades about 0.04 of its total potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about 0.14 per unit of volatility. If you would invest  927.00  in Shenzhen Noposion Agrochemicals on October 1, 2024 and sell it today you would earn a total of  225.00  from holding Shenzhen Noposion Agrochemicals or generate 24.27% return on investment over 90 days.

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

HeBei Jinniu Chemical  vs.  Shenzhen Noposion Agrochemical

HeBei Jinniu Chemical

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shenzhen Noposion

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeBei Jinniu and Shenzhen Noposion

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

The idea behind HeBei Jinniu Chemical and Shenzhen Noposion Agrochemicals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.