Correlation Between Changchun Engley and Nantong Haixing

Can any of the company-specific risk be diversified away by investing in both Changchun Engley and Nantong Haixing 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 Changchun Engley and Nantong Haixing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changchun Engley Automobile and Nantong Haixing Electronics, you can compare the effects of market volatilities on Changchun Engley and Nantong Haixing 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 Changchun Engley with a short position of Nantong Haixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Engley and Nantong Haixing.

Diversification Opportunities for Changchun Engley and Nantong Haixing

0.87

Correlation Coefficient

Changchun Engley  Nantong Haixing

Very poor diversification

The 3 months correlation between Changchun and Nantong is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Nantong Haixing Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Haixing Elec and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Nantong Haixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Haixing Elec has no effect on the direction of Changchun Engley i.e., Changchun Engley and Nantong Haixing go up and down completely randomly.

Pair Corralation between Changchun Engley and Nantong Haixing

Assuming the 90 days trading horizon Changchun Engley Automobile is expected to under-perform the Nantong Haixing. In addition to that, Changchun Engley is 1.47 times more volatile than Nantong Haixing Electronics. It trades about -0.02 of its total potential returns per unit of risk. Nantong Haixing Electronics is currently generating about 0.06 per unit of volatility. If you would invest  1,193  in Nantong Haixing Electronics on October 11, 2024 and sell it today you would earn a total of  79.00  from holding Nantong Haixing Electronics or generate 6.62% return on investment over 90 days.

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

Changchun Engley Automobile  vs.  Nantong Haixing Electronics

Changchun Engley Aut

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changchun Engley Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changchun Engley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nantong Haixing Elec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Haixing Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nantong Haixing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Changchun Engley and Nantong Haixing

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

The idea behind Changchun Engley Automobile and Nantong Haixing Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.