Correlation Between Chongqing Rural and Nomura Holdings

Can any of the company-specific risk be diversified away by investing in both Chongqing Rural and Nomura Holdings 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 Chongqing Rural and Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Rural Commercial and Nomura Holdings ADR, you can compare the effects of market volatilities on Chongqing Rural and Nomura Holdings 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 Chongqing Rural with a short position of Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Rural and Nomura Holdings.

Diversification Opportunities for Chongqing Rural and Nomura Holdings

0.43

Correlation Coefficient

Chongqing Rural  Nomura Holdings

Very weak diversification

The 3 months correlation between Chongqing and Nomura is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Rural Commercial and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR and Chongqing Rural 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 Chongqing Rural Commercial are associated (or correlated) with Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Chongqing Rural i.e., Chongqing Rural and Nomura Holdings go up and down completely randomly.

Pair Corralation between Chongqing Rural and Nomura Holdings

Assuming the 90 days horizon Chongqing Rural Commercial is expected to generate 4.17 times more return on investment than Nomura Holdings. However, Chongqing Rural is 4.17 times more volatile than Nomura Holdings ADR. It trades about -0.03 of its potential returns per unit of risk. Nomura Holdings ADR is currently generating about -0.32 per unit of risk. If you would invest  2,711  in Chongqing Rural Commercial on October 5, 2024 and sell it today you would lose (119.00) from holding Chongqing Rural Commercial or give up 4.39% of portfolio value over 90 days.

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

Chongqing Rural Commercial  vs.  Nomura Holdings ADR

Chongqing Rural Comm

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Chongqing Rural showed solid returns over the last few months and may actually be approaching a breakup point.

Nomura Holdings ADR

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Nomura Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chongqing Rural and Nomura Holdings

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

The idea behind Chongqing Rural Commercial and Nomura Holdings ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.