Correlation Between Niutech Environment and Huatian Hotel

Can any of the company-specific risk be diversified away by investing in both Niutech Environment and Huatian Hotel 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 Niutech Environment and Huatian Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Niutech Environment Technology and Huatian Hotel Group, you can compare the effects of market volatilities on Niutech Environment and Huatian Hotel 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 Niutech Environment with a short position of Huatian Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niutech Environment and Huatian Hotel.

Diversification Opportunities for Niutech Environment and Huatian Hotel

0.69

Correlation Coefficient

Niutech Environment  Huatian Hotel

Poor diversification

The 3 months correlation between Niutech and Huatian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Niutech Environment Technology and Huatian Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huatian Hotel Group and Niutech Environment 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 Niutech Environment Technology are associated (or correlated) with Huatian Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huatian Hotel Group has no effect on the direction of Niutech Environment i.e., Niutech Environment and Huatian Hotel go up and down completely randomly.

Pair Corralation between Niutech Environment and Huatian Hotel

Assuming the 90 days trading horizon Niutech Environment Technology is expected to under-perform the Huatian Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Niutech Environment Technology is 1.21 times less risky than Huatian Hotel. The stock trades about -0.1 of its potential returns per unit of risk. The Huatian Hotel Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Huatian Hotel Group on September 29, 2024 and sell it today you would lose (14.00) from holding Huatian Hotel Group or give up 4.06% of portfolio value over 90 days.

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

Niutech Environment Technology  vs.  Huatian Hotel Group

Niutech Environment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Niutech Environment Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Niutech Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huatian Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huatian Hotel 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.

Pair Trading with Niutech Environment and Huatian Hotel

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

The idea behind Niutech Environment Technology and Huatian Hotel Group 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.