Correlation Between Ping An and Northern United

Can any of the company-specific risk be diversified away by investing in both Ping An and Northern United 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 Ping An and Northern United into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Northern United Publishing, you can compare the effects of market volatilities on Ping An and Northern United 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 Ping An with a short position of Northern United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Northern United.

Diversification Opportunities for Ping An and Northern United

0.39

Correlation Coefficient

Ping An  Northern United

Weak diversification

The 3 months correlation between Ping and Northern is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Northern United Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern United Publ and Ping An 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 Ping An Insurance are associated (or correlated) with Northern United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern United Publ has no effect on the direction of Ping An i.e., Ping An and Northern United go up and down completely randomly.

Pair Corralation between Ping An and Northern United

Assuming the 90 days trading horizon Ping An is expected to generate 1.27 times less return on investment than Northern United. But when comparing it to its historical volatility, Ping An Insurance is 1.15 times less risky than Northern United. It trades about 0.08 of its potential returns per unit of risk. Northern United Publishing is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  570.00  in Northern United Publishing on September 25, 2024 and sell it today you would earn a total of  88.00  from holding Northern United Publishing or generate 15.44% return on investment over 90 days.

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

Ping An Insurance  vs.  Northern United Publishing

Ping An Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Northern United Publ

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern United Publishing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northern United sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Northern United

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

The idea behind Ping An Insurance and Northern United Publishing 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.