Correlation Between Niutech Environment and Inner Mongolia

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

Diversification Opportunities for Niutech Environment and Inner Mongolia

0.81

Correlation Coefficient

Niutech Environment  Inner Mongolia

Very poor diversification

The 3 months correlation between Niutech and Inner is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Niutech Environment Technology and Inner Mongolia BaoTou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia BaoTou 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia BaoTou has no effect on the direction of Niutech Environment i.e., Niutech Environment and Inner Mongolia go up and down completely randomly.

Pair Corralation between Niutech Environment and Inner Mongolia

Assuming the 90 days trading horizon Niutech Environment Technology is expected to under-perform the Inner Mongolia. In addition to that, Niutech Environment is 1.33 times more volatile than Inner Mongolia BaoTou. It trades about -0.18 of its total potential returns per unit of risk. Inner Mongolia BaoTou is currently generating about -0.08 per unit of volatility. If you would invest  199.00  in Inner Mongolia BaoTou on September 25, 2024 and sell it today you would lose (7.00) from holding Inner Mongolia BaoTou or give up 3.52% of portfolio value over 90 days.

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

Niutech Environment Technology  vs.  Inner Mongolia BaoTou

Niutech Environment

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Niutech Environment Technology are ranked lower than 6 (%) 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.

Inner Mongolia BaoTou

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia BaoTou are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inner Mongolia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Niutech Environment and Inner Mongolia

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

The idea behind Niutech Environment Technology and Inner Mongolia BaoTou 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.

Check out your portfolio center.

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.