Correlation Between Ningxia Younglight and Qingdao Citymedia

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

By analyzing existing cross correlation between Ningxia Younglight Chemicals and Qingdao Citymedia Co, you can compare the effects of market volatilities on Ningxia Younglight and Qingdao Citymedia 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 Ningxia Younglight with a short position of Qingdao Citymedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Younglight and Qingdao Citymedia.

Diversification Opportunities for Ningxia Younglight and Qingdao Citymedia

0.68

Correlation Coefficient

Ningxia Younglight  Qingdao Citymedia

Poor diversification

The 3 months correlation between Ningxia and Qingdao is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Younglight Chemicals and Qingdao Citymedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Citymedia and Ningxia Younglight 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 Ningxia Younglight Chemicals are associated (or correlated) with Qingdao Citymedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Citymedia has no effect on the direction of Ningxia Younglight i.e., Ningxia Younglight and Qingdao Citymedia go up and down completely randomly.

Pair Corralation between Ningxia Younglight and Qingdao Citymedia

Assuming the 90 days trading horizon Ningxia Younglight Chemicals is expected to generate 1.41 times more return on investment than Qingdao Citymedia. However, Ningxia Younglight is 1.41 times more volatile than Qingdao Citymedia Co. It trades about 0.21 of its potential returns per unit of risk. Qingdao Citymedia Co is currently generating about 0.17 per unit of risk. If you would invest  572.00  in Ningxia Younglight Chemicals on September 12, 2024 and sell it today you would earn a total of  280.00  from holding Ningxia Younglight Chemicals or generate 48.95% return on investment over 90 days.

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

Ningxia Younglight Chemicals  vs.  Qingdao Citymedia Co

Ningxia Younglight

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Younglight Chemicals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Younglight sustained solid returns over the last few months and may actually be approaching a breakup point.

Qingdao Citymedia

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Citymedia Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Citymedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningxia Younglight and Qingdao Citymedia

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

The idea behind Ningxia Younglight Chemicals and Qingdao Citymedia Co 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.