Correlation Between Nanya New and Beijing Shunxin

Can any of the company-specific risk be diversified away by investing in both Nanya New and Beijing Shunxin 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 Nanya New and Beijing Shunxin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanya New Material and Beijing Shunxin Agriculture, you can compare the effects of market volatilities on Nanya New and Beijing Shunxin 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 Nanya New with a short position of Beijing Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanya New and Beijing Shunxin.

Diversification Opportunities for Nanya New and Beijing Shunxin

0.82

Correlation Coefficient

Nanya New  Beijing Shunxin

Very poor diversification

The 3 months correlation between Nanya and Beijing is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nanya New Material and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri and Nanya New 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 Nanya New Material are associated (or correlated) with Beijing Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Nanya New i.e., Nanya New and Beijing Shunxin go up and down completely randomly.

Pair Corralation between Nanya New and Beijing Shunxin

Assuming the 90 days trading horizon Nanya New Material is expected to under-perform the Beijing Shunxin. But the stock apears to be less risky and, when comparing its historical volatility, Nanya New Material is 1.25 times less risky than Beijing Shunxin. The stock trades about -0.16 of its potential returns per unit of risk. The Beijing Shunxin Agriculture is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,888  in Beijing Shunxin Agriculture on September 18, 2024 and sell it today you would earn a total of  120.00  from holding Beijing Shunxin Agriculture or generate 6.36% return on investment over 90 days.

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

Nanya New Material  vs.  Beijing Shunxin Agriculture

Nanya New Material

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanya New Material are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanya New sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Shunxin Agri

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Shunxin Agriculture are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Shunxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanya New and Beijing Shunxin

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

The idea behind Nanya New Material and Beijing Shunxin Agriculture 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.