Correlation Between Bank of Nanjing and Shandong Homey

Can any of the company-specific risk be diversified away by investing in both Bank of Nanjing and Shandong Homey 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 Bank of Nanjing and Shandong Homey into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Nanjing and Shandong Homey Aquatic, you can compare the effects of market volatilities on Bank of Nanjing and Shandong Homey 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 Bank of Nanjing with a short position of Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nanjing and Shandong Homey.

Diversification Opportunities for Bank of Nanjing and Shandong Homey

0.3

Correlation Coefficient

Bank of Nanjing  Shandong Homey

Weak diversification

The 3 months correlation between Bank and Shandong is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nanjing and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic and Bank of Nanjing 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 Bank of Nanjing are associated (or correlated) with Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Bank of Nanjing i.e., Bank of Nanjing and Shandong Homey go up and down completely randomly.

Pair Corralation between Bank of Nanjing and Shandong Homey

Assuming the 90 days trading horizon Bank of Nanjing is expected to generate 0.49 times more return on investment than Shandong Homey. However, Bank of Nanjing is 2.02 times less risky than Shandong Homey. It trades about 0.02 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about 0.01 per unit of risk. If you would invest  977.00  in Bank of Nanjing on September 20, 2024 and sell it today you would earn a total of  76.00  from holding Bank of Nanjing or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Bank of Nanjing  vs.  Shandong Homey Aquatic

Bank of Nanjing

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nanjing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Nanjing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shandong Homey Aquatic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Nanjing and Shandong Homey

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

The idea behind Bank of Nanjing and Shandong Homey Aquatic 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 Directory module to find actively traded commodities issued by global exchanges.