Correlation Between Bank of Nanjing and Cultural Investment

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Can any of the company-specific risk be diversified away by investing in both Bank of Nanjing and Cultural Investment 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 Cultural Investment 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 Cultural Investment Holdings, you can compare the effects of market volatilities on Bank of Nanjing and Cultural Investment 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 Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nanjing and Cultural Investment.

Diversification Opportunities for Bank of Nanjing and Cultural Investment

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Bank and Cultural is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nanjing and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment 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 Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Bank of Nanjing i.e., Bank of Nanjing and Cultural Investment go up and down completely randomly.

Pair Corralation between Bank of Nanjing and Cultural Investment

Assuming the 90 days trading horizon Bank of Nanjing is expected to generate 9.65 times less return on investment than Cultural Investment. But when comparing it to its historical volatility, Bank of Nanjing is 3.46 times less risky than Cultural Investment. It trades about 0.04 of its potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Cultural Investment Holdings on September 22, 2024 and sell it today you would earn a total of  28.00  from holding Cultural Investment Holdings or generate 14.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.78%
ValuesDaily Returns

Bank of Nanjing  vs.  Cultural Investment Holdings

 Performance 
       Timeline  
Bank of Nanjing 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
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.
Cultural Investment 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank of Nanjing and Cultural Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of Nanjing and Cultural Investment

The main advantage of trading using opposite Bank of Nanjing and Cultural Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nanjing position performs unexpectedly, Cultural Investment 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 Cultural Investment will offset losses from the drop in Cultural Investment's long position.
The idea behind Bank of Nanjing and Cultural Investment Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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