Correlation Between New Generation and China De

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

By analyzing existing cross correlation between New Generation Consumer and China De Xiao, you can compare the effects of market volatilities on New Generation and China De 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 New Generation with a short position of China De. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Generation and China De.

Diversification Opportunities for New Generation and China De

0.33

Correlation Coefficient

New Generation  China De

Weak diversification

The 3 months correlation between New and China is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and China De Xiao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China De Xiao and New Generation 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 New Generation Consumer are associated (or correlated) with China De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China De Xiao has no effect on the direction of New Generation i.e., New Generation and China De go up and down completely randomly.

Pair Corralation between New Generation and China De

Given the investment horizon of 90 days New Generation Consumer is expected to generate 2.32 times more return on investment than China De. However, New Generation is 2.32 times more volatile than China De Xiao. It trades about -0.01 of its potential returns per unit of risk. China De Xiao is currently generating about -0.13 per unit of risk. If you would invest  0.10  in New Generation Consumer on October 26, 2024 and sell it today you would lose (0.05) from holding New Generation Consumer or give up 50.0% of portfolio value over 90 days.

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

New Generation Consumer  vs.  China De Xiao

New Generation Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Generation Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, New Generation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China De Xiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China De Xiao has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with New Generation and China De

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

The idea behind New Generation Consumer and China De Xiao 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.