Correlation Between CNPC Capital and NBTM New

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

By analyzing existing cross correlation between CNPC Capital Co and NBTM New Materials, you can compare the effects of market volatilities on CNPC Capital and NBTM New 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 CNPC Capital with a short position of NBTM New. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNPC Capital and NBTM New.

Diversification Opportunities for CNPC Capital and NBTM New

0.86

Correlation Coefficient

CNPC Capital  NBTM New

Very poor diversification

The 3 months correlation between CNPC and NBTM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CNPC Capital Co and NBTM New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBTM New Materials and CNPC Capital 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 CNPC Capital Co are associated (or correlated) with NBTM New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBTM New Materials has no effect on the direction of CNPC Capital i.e., CNPC Capital and NBTM New go up and down completely randomly.

Pair Corralation between CNPC Capital and NBTM New

Assuming the 90 days trading horizon CNPC Capital Co is expected to under-perform the NBTM New. But the stock apears to be less risky and, when comparing its historical volatility, CNPC Capital Co is 1.9 times less risky than NBTM New. The stock trades about -0.06 of its potential returns per unit of risk. The NBTM New Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,582  in NBTM New Materials on September 25, 2024 and sell it today you would earn a total of  67.00  from holding NBTM New Materials or generate 4.24% return on investment over 90 days.

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

CNPC Capital Co  vs.  NBTM New Materials

CNPC Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNPC Capital Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNPC Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

NBTM New Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NBTM New Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBTM New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNPC Capital and NBTM New

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

The idea behind CNPC Capital Co and NBTM New Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.