Correlation Between China Everbright and Northern United

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

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

Diversification Opportunities for China Everbright and Northern United

0.42

Correlation Coefficient

China Everbright  Northern United

Very weak diversification

The 3 months correlation between China and Northern is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank 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 China Everbright 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 Everbright Bank 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 China Everbright i.e., China Everbright and Northern United go up and down completely randomly.

Pair Corralation between China Everbright and Northern United

Assuming the 90 days trading horizon China Everbright Bank is expected to generate 0.41 times more return on investment than Northern United. However, China Everbright Bank is 2.46 times less risky than Northern United. It trades about 0.05 of its potential returns per unit of risk. Northern United Publishing is currently generating about 0.01 per unit of risk. If you would invest  291.00  in China Everbright Bank on October 11, 2024 and sell it today you would earn a total of  83.00  from holding China Everbright Bank or generate 28.52% return on investment over 90 days.

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

China Everbright Bank  vs.  Northern United Publishing

China Everbright Bank

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Everbright may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Northern United Publ

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern United Publishing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Northern United 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 Everbright and Northern United

The main advantage of trading using opposite China Everbright and Northern United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Everbright 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 China Everbright Bank 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.