Correlation Between China State and Nantong Haixing

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

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

Diversification Opportunities for China State and Nantong Haixing

0.04

Correlation Coefficient

China State  Nantong Haixing

Significant diversification

The 3 months correlation between China and Nantong is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction 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 China State 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 China State Construction 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 China State i.e., China State and Nantong Haixing go up and down completely randomly.

Pair Corralation between China State and Nantong Haixing

Assuming the 90 days trading horizon China State Construction is expected to generate 0.63 times more return on investment than Nantong Haixing. However, China State Construction is 1.6 times less risky than Nantong Haixing. It trades about -0.25 of its potential returns per unit of risk. Nantong Haixing Electronics is currently generating about -0.27 per unit of risk. If you would invest  610.00  in China State Construction on October 9, 2024 and sell it today you would lose (36.00) from holding China State Construction or give up 5.9% of portfolio value over 90 days.

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

China State Construction  vs.  Nantong Haixing Electronics

China State Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China State Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China State 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

0 of 100

Very Weak

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

Pair Trading with China State and Nantong Haixing

The main advantage of trading using opposite China State and Nantong Haixing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State 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 China State Construction 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.