Correlation Between Nancal Energy and HeNan Splendor

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

By analyzing existing cross correlation between Nancal Energy Saving Tech and HeNan Splendor Science, you can compare the effects of market volatilities on Nancal Energy and HeNan Splendor 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 Nancal Energy with a short position of HeNan Splendor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nancal Energy and HeNan Splendor.

Diversification Opportunities for Nancal Energy and HeNan Splendor

0.79

Correlation Coefficient

Nancal Energy  HeNan Splendor

Poor diversification

The 3 months correlation between Nancal and HeNan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nancal Energy Saving Tech and HeNan Splendor Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeNan Splendor Science and Nancal Energy 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 Nancal Energy Saving Tech are associated (or correlated) with HeNan Splendor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeNan Splendor Science has no effect on the direction of Nancal Energy i.e., Nancal Energy and HeNan Splendor go up and down completely randomly.

Pair Corralation between Nancal Energy and HeNan Splendor

Assuming the 90 days trading horizon Nancal Energy Saving Tech is expected to generate 1.37 times more return on investment than HeNan Splendor. However, Nancal Energy is 1.37 times more volatile than HeNan Splendor Science. It trades about 0.28 of its potential returns per unit of risk. HeNan Splendor Science is currently generating about 0.16 per unit of risk. If you would invest  1,463  in Nancal Energy Saving Tech on September 5, 2024 and sell it today you would earn a total of  1,621  from holding Nancal Energy Saving Tech or generate 110.8% return on investment over 90 days.

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

Nancal Energy Saving Tech  vs.  HeNan Splendor Science

Nancal Energy Saving

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nancal Energy Saving Tech are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nancal Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

HeNan Splendor Science

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeNan Splendor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nancal Energy and HeNan Splendor

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

The idea behind Nancal Energy Saving Tech and HeNan Splendor Science 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.