Correlation Between National Silicon and Changzhou Almaden

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Can any of the company-specific risk be diversified away by investing in both National Silicon and Changzhou Almaden 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 National Silicon and Changzhou Almaden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Silicon Industry and Changzhou Almaden Co, you can compare the effects of market volatilities on National Silicon and Changzhou Almaden 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 National Silicon with a short position of Changzhou Almaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Silicon and Changzhou Almaden.

Diversification Opportunities for National Silicon and Changzhou Almaden

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between National and Changzhou is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and Changzhou Almaden Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changzhou Almaden and National Silicon 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 National Silicon Industry are associated (or correlated) with Changzhou Almaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changzhou Almaden has no effect on the direction of National Silicon i.e., National Silicon and Changzhou Almaden go up and down completely randomly.

Pair Corralation between National Silicon and Changzhou Almaden

Assuming the 90 days trading horizon National Silicon Industry is expected to under-perform the Changzhou Almaden. But the stock apears to be less risky and, when comparing its historical volatility, National Silicon Industry is 1.3 times less risky than Changzhou Almaden. The stock trades about -0.46 of its potential returns per unit of risk. The Changzhou Almaden Co is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  1,713  in Changzhou Almaden Co on October 7, 2024 and sell it today you would lose (249.00) from holding Changzhou Almaden Co or give up 14.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

National Silicon Industry  vs.  Changzhou Almaden Co

 Performance 
       Timeline  
National Silicon Industry 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days National Silicon Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Changzhou Almaden 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Changzhou Almaden Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

National Silicon and Changzhou Almaden Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Silicon and Changzhou Almaden

The main advantage of trading using opposite National Silicon and Changzhou Almaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Silicon position performs unexpectedly, Changzhou Almaden 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 Changzhou Almaden will offset losses from the drop in Changzhou Almaden's long position.
The idea behind National Silicon Industry and Changzhou Almaden 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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