Correlation Between APT Medical and Nanxing Furniture

Can any of the company-specific risk be diversified away by investing in both APT Medical and Nanxing Furniture 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 APT Medical and Nanxing Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APT Medical and Nanxing Furniture Machinery, you can compare the effects of market volatilities on APT Medical and Nanxing Furniture 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 APT Medical with a short position of Nanxing Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of APT Medical and Nanxing Furniture.

Diversification Opportunities for APT Medical and Nanxing Furniture

0.06

Correlation Coefficient

APT Medical  Nanxing Furniture

Significant diversification

The 3 months correlation between APT and Nanxing is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding APT Medical and Nanxing Furniture Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanxing Furniture and APT Medical 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 APT Medical are associated (or correlated) with Nanxing Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanxing Furniture has no effect on the direction of APT Medical i.e., APT Medical and Nanxing Furniture go up and down completely randomly.

Pair Corralation between APT Medical and Nanxing Furniture

Assuming the 90 days trading horizon APT Medical is expected to generate 0.83 times more return on investment than Nanxing Furniture. However, APT Medical is 1.2 times less risky than Nanxing Furniture. It trades about 0.05 of its potential returns per unit of risk. Nanxing Furniture Machinery is currently generating about 0.02 per unit of risk. If you would invest  26,222  in APT Medical on October 5, 2024 and sell it today you would earn a total of  10,148  from holding APT Medical or generate 38.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.67%
Values	Daily Returns

APT Medical  vs.  Nanxing Furniture Machinery

APT Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APT Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nanxing Furniture

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Nanxing Furniture Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nanxing Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with APT Medical and Nanxing Furniture

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

The idea behind APT Medical and Nanxing Furniture Machinery 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.