Correlation Between Nancal Energy and Lutian Machinery

Can any of the company-specific risk be diversified away by investing in both Nancal Energy and Lutian Machinery 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 Nancal Energy and Lutian Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nancal Energy Saving Tech and Lutian Machinery Co, you can compare the effects of market volatilities on Nancal Energy and Lutian Machinery 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 Nancal Energy with a short position of Lutian Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nancal Energy and Lutian Machinery.

Diversification Opportunities for Nancal Energy and Lutian Machinery

0.93

Correlation Coefficient

Nancal Energy  Lutian Machinery

Almost no diversification

The 3 months correlation between Nancal and Lutian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nancal Energy Saving Tech and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and Nancal Energy 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 Nancal Energy Saving Tech are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of Nancal Energy i.e., Nancal Energy and Lutian Machinery go up and down completely randomly.

Pair Corralation between Nancal Energy and Lutian Machinery

Assuming the 90 days trading horizon Nancal Energy Saving Tech is expected to generate 3.63 times more return on investment than Lutian Machinery. However, Nancal Energy is 3.63 times more volatile than Lutian Machinery Co. It trades about 0.17 of its potential returns per unit of risk. Lutian Machinery Co is currently generating about 0.04 per unit of risk. If you would invest  2,989  in Nancal Energy Saving Tech on September 14, 2024 and sell it today you would earn a total of  629.00  from holding Nancal Energy Saving Tech or generate 21.04% return on investment over 90 days.

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

Nancal Energy Saving Tech  vs.  Lutian Machinery Co

Nancal Energy Saving

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nancal Energy Saving Tech are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nancal Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Lutian Machinery

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nancal Energy and Lutian Machinery

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

The idea behind Nancal Energy Saving Tech and Lutian Machinery Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.