Correlation Between Eastroc Beverage and Nanjing Putian

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Nanjing Putian 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 Eastroc Beverage and Nanjing Putian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastroc Beverage Group and Nanjing Putian Telecommunications, you can compare the effects of market volatilities on Eastroc Beverage and Nanjing Putian 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 Eastroc Beverage with a short position of Nanjing Putian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Nanjing Putian.

Diversification Opportunities for Eastroc Beverage and Nanjing Putian

0.63

Correlation Coefficient

Eastroc Beverage  Nanjing Putian

Poor diversification

The 3 months correlation between Eastroc and Nanjing is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Nanjing Putian Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Putian Telec and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Nanjing Putian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Putian Telec has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Nanjing Putian go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Nanjing Putian

Assuming the 90 days trading horizon Eastroc Beverage is expected to generate 3.02 times less return on investment than Nanjing Putian. But when comparing it to its historical volatility, Eastroc Beverage Group is 2.2 times less risky than Nanjing Putian. It trades about 0.14 of its potential returns per unit of risk. Nanjing Putian Telecommunications is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Nanjing Putian Telecommunications on September 28, 2024 and sell it today you would earn a total of  143.00  from holding Nanjing Putian Telecommunications or generate 59.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Eastroc Beverage Group  vs.  Nanjing Putian Telecommunicati

Eastroc Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Nanjing Putian Telec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Nanjing Putian

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

The idea behind Eastroc Beverage Group and Nanjing Putian Telecommunications 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.