Correlation Between Eastroc Beverage and Nantong Haixing

Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage 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 Eastroc Beverage and Nantong Haixing 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 Nantong Haixing Electronics, you can compare the effects of market volatilities on Eastroc Beverage 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 Eastroc Beverage with a short position of Nantong Haixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Nantong Haixing.

Diversification Opportunities for Eastroc Beverage and Nantong Haixing

-0.72

Correlation Coefficient

Eastroc Beverage  Nantong Haixing

Pay attention - limited upside

The 3 months correlation between Eastroc and Nantong is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group 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 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 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 Eastroc Beverage i.e., Eastroc Beverage and Nantong Haixing go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Nantong Haixing

Assuming the 90 days trading horizon Eastroc Beverage Group is expected to under-perform the Nantong Haixing. In addition to that, Eastroc Beverage is 1.23 times more volatile than Nantong Haixing Electronics. It trades about -0.03 of its total potential returns per unit of risk. Nantong Haixing Electronics is currently generating about 0.12 per unit of volatility. If you would invest  1,282  in Nantong Haixing Electronics on December 25, 2024 and sell it today you would earn a total of  168.00  from holding Nantong Haixing Electronics or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Eastroc Beverage Group  vs.  Nantong Haixing Electronics

Eastroc Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastroc Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eastroc Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nantong Haixing Elec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Haixing Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nantong Haixing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastroc Beverage and Nantong Haixing

The main advantage of trading using opposite Eastroc Beverage and Nantong Haixing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastroc Beverage 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 Eastroc Beverage Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.