Correlation Between Nanya New and HeBei Jinniu

Can any of the company-specific risk be diversified away by investing in both Nanya New and HeBei Jinniu 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 HeBei Jinniu 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 HeBei Jinniu Chemical, you can compare the effects of market volatilities on Nanya New and HeBei Jinniu 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 HeBei Jinniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanya New and HeBei Jinniu.

Diversification Opportunities for Nanya New and HeBei Jinniu

0.45

Correlation Coefficient

Nanya New  HeBei Jinniu

Very weak diversification

The 3 months correlation between Nanya and HeBei is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nanya New Material and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of Nanya New i.e., Nanya New and HeBei Jinniu go up and down completely randomly.

Pair Corralation between Nanya New and HeBei Jinniu

Assuming the 90 days trading horizon Nanya New Material is expected to generate 1.52 times more return on investment than HeBei Jinniu. However, Nanya New is 1.52 times more volatile than HeBei Jinniu Chemical. It trades about 0.02 of its potential returns per unit of risk. HeBei Jinniu Chemical is currently generating about 0.02 per unit of risk. If you would invest  2,101  in Nanya New Material on September 18, 2024 and sell it today you would lose (22.00) from holding Nanya New Material or give up 1.05% of portfolio value over 90 days.

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

Nanya New Material  vs.  HeBei Jinniu Chemical

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.

HeBei Jinniu Chemical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HeBei Jinniu Chemical are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeBei Jinniu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanya New and HeBei Jinniu

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

The idea behind Nanya New Material and HeBei Jinniu Chemical 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.