Correlation Between Epoxy Base and Nantong Haixing

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

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

Diversification Opportunities for Epoxy Base and Nantong Haixing

0.65

Correlation Coefficient

Epoxy Base  Nantong Haixing

Poor diversification

The 3 months correlation between Epoxy and Nantong is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Epoxy Base Electronic 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 Epoxy Base 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 Epoxy Base Electronic 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 Epoxy Base i.e., Epoxy Base and Nantong Haixing go up and down completely randomly.

Pair Corralation between Epoxy Base and Nantong Haixing

Assuming the 90 days trading horizon Epoxy Base Electronic is expected to under-perform the Nantong Haixing. In addition to that, Epoxy Base is 1.89 times more volatile than Nantong Haixing Electronics. It trades about -0.54 of its total potential returns per unit of risk. Nantong Haixing Electronics is currently generating about -0.3 per unit of volatility. If you would invest  1,377  in Nantong Haixing Electronics on October 7, 2024 and sell it today you would lose (148.00) from holding Nantong Haixing Electronics or give up 10.75% of portfolio value over 90 days.

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

Epoxy Base Electronic  vs.  Nantong Haixing Electronics

Epoxy Base Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epoxy Base Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Epoxy Base and Nantong Haixing

The main advantage of trading using opposite Epoxy Base and Nantong Haixing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epoxy Base 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 Epoxy Base Electronic 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.