Correlation Between Northern United and Xiamen Jihong

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

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

Diversification Opportunities for Northern United and Xiamen Jihong

0.83

Correlation Coefficient

Northern United  Xiamen Jihong

Very poor diversification

The 3 months correlation between Northern and Xiamen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Northern United Publishing and Xiamen Jihong Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Jihong Package and Northern United 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 Northern United Publishing are associated (or correlated) with Xiamen Jihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Jihong Package has no effect on the direction of Northern United i.e., Northern United and Xiamen Jihong go up and down completely randomly.

Pair Corralation between Northern United and Xiamen Jihong

Assuming the 90 days trading horizon Northern United Publishing is expected to generate 0.94 times more return on investment than Xiamen Jihong. However, Northern United Publishing is 1.06 times less risky than Xiamen Jihong. It trades about -0.26 of its potential returns per unit of risk. Xiamen Jihong Package is currently generating about -0.33 per unit of risk. If you would invest  730.00  in Northern United Publishing on October 11, 2024 and sell it today you would lose (127.00) from holding Northern United Publishing or give up 17.4% of portfolio value over 90 days.

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

Northern United Publishing  vs.  Xiamen Jihong Package

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.

Xiamen Jihong Package

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Jihong Package are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Jihong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Northern United and Xiamen Jihong

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

The idea behind Northern United Publishing and Xiamen Jihong Package 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.