Correlation Between Niutech Environment and Changchun

Can any of the company-specific risk be diversified away by investing in both Niutech Environment and Changchun 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 Changchun 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 Changchun UP Optotech, you can compare the effects of market volatilities on Niutech Environment and Changchun 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 Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niutech Environment and Changchun.

Diversification Opportunities for Niutech Environment and Changchun

0.89

Correlation Coefficient

Niutech Environment  Changchun

Very poor diversification

The 3 months correlation between Niutech and Changchun is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Niutech Environment Technology and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech 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 Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Niutech Environment i.e., Niutech Environment and Changchun go up and down completely randomly.

Pair Corralation between Niutech Environment and Changchun

Assuming the 90 days trading horizon Niutech Environment is expected to generate 1.62 times less return on investment than Changchun. But when comparing it to its historical volatility, Niutech Environment Technology is 1.16 times less risky than Changchun. It trades about 0.18 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,427  in Changchun UP Optotech on September 13, 2024 and sell it today you would earn a total of  1,867  from holding Changchun UP Optotech or generate 76.93% return on investment over 90 days.

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

Niutech Environment Technology  vs.  Changchun UP Optotech

Niutech Environment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niutech Environment Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Niutech Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Changchun UP Optotech

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Niutech Environment and Changchun

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

The idea behind Niutech Environment Technology and Changchun UP Optotech 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.