Correlation Between Gotion High and NBTM New

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

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

Diversification Opportunities for Gotion High and NBTM New

0.64

Correlation Coefficient

Gotion High  NBTM New

Poor diversification

The 3 months correlation between Gotion and NBTM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gotion High tech 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 Gotion High 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 Gotion High tech 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 Gotion High i.e., Gotion High and NBTM New go up and down completely randomly.

Pair Corralation between Gotion High and NBTM New

Assuming the 90 days trading horizon Gotion High tech is expected to under-perform the NBTM New. But the stock apears to be less risky and, when comparing its historical volatility, Gotion High tech is 1.64 times less risky than NBTM New. The stock trades about -0.36 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	Significant
Accuracy	100.0%
Values	Daily Returns

Gotion High tech  vs.  NBTM New Materials

Gotion High tech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gotion High tech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gotion High 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 Gotion High and NBTM New

The main advantage of trading using opposite Gotion High and NBTM New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotion High 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 Gotion High tech 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.