Correlation Between Huitong Construction and Ningxia Younglight

Can any of the company-specific risk be diversified away by investing in both Huitong Construction and Ningxia Younglight 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 Huitong Construction and Ningxia Younglight into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huitong Construction Group and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Huitong Construction and Ningxia Younglight 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 Huitong Construction with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huitong Construction and Ningxia Younglight.

Diversification Opportunities for Huitong Construction and Ningxia Younglight

0.57

Correlation Coefficient

Huitong Construction  Ningxia Younglight

Very weak diversification

The 3 months correlation between Huitong and Ningxia is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Huitong Construction Group and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Huitong Construction 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 Huitong Construction Group are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Huitong Construction i.e., Huitong Construction and Ningxia Younglight go up and down completely randomly.

Pair Corralation between Huitong Construction and Ningxia Younglight

Assuming the 90 days trading horizon Huitong Construction Group is expected to generate 0.8 times more return on investment than Ningxia Younglight. However, Huitong Construction Group is 1.24 times less risky than Ningxia Younglight. It trades about -0.06 of its potential returns per unit of risk. Ningxia Younglight Chemicals is currently generating about -0.06 per unit of risk. If you would invest  548.00  in Huitong Construction Group on December 2, 2024 and sell it today you would lose (54.00) from holding Huitong Construction Group or give up 9.85% of portfolio value over 90 days.

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

Huitong Construction Group  vs.  Ningxia Younglight Chemicals

Huitong Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huitong Construction Group 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.

Ningxia Younglight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Younglight Chemicals 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 Huitong Construction and Ningxia Younglight

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

The idea behind Huitong Construction Group and Ningxia Younglight Chemicals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.