Correlation Between Nongfu Spring and NOHO

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

By analyzing existing cross correlation between Nongfu Spring Co and NOHO Inc, you can compare the effects of market volatilities on Nongfu Spring and NOHO 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 Nongfu Spring with a short position of NOHO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nongfu Spring and NOHO.

Diversification Opportunities for Nongfu Spring and NOHO

-0.69

Correlation Coefficient

Nongfu Spring  NOHO

Excellent diversification

The 3 months correlation between Nongfu and NOHO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nongfu Spring Co and NOHO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOHO Inc and Nongfu Spring 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 Nongfu Spring Co are associated (or correlated) with NOHO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOHO Inc has no effect on the direction of Nongfu Spring i.e., Nongfu Spring and NOHO go up and down completely randomly.

Pair Corralation between Nongfu Spring and NOHO

Assuming the 90 days horizon Nongfu Spring is expected to generate 5.82 times less return on investment than NOHO. But when comparing it to its historical volatility, Nongfu Spring Co is 5.55 times less risky than NOHO. It trades about 0.07 of its potential returns per unit of risk. NOHO Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.03  in NOHO Inc on September 13, 2024 and sell it today you would lose (0.01) from holding NOHO Inc or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nongfu Spring Co  vs.  NOHO Inc

Nongfu Spring

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nongfu Spring reported solid returns over the last few months and may actually be approaching a breakup point.

NOHO Inc

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOHO Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, NOHO disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nongfu Spring and NOHO

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

The idea behind Nongfu Spring Co and NOHO Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.