Correlation Between WUXI NCE and FUJIAN AONONG

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Can any of the company-specific risk be diversified away by investing in both WUXI NCE and FUJIAN AONONG 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 WUXI NCE and FUJIAN AONONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WUXI NCE POWER and FUJIAN AONONG BIOLOGICAL, you can compare the effects of market volatilities on WUXI NCE and FUJIAN AONONG 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 WUXI NCE with a short position of FUJIAN AONONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of WUXI NCE and FUJIAN AONONG.

Diversification Opportunities for WUXI NCE and FUJIAN AONONG

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between 605111 and FUJIAN is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WUXI NCE POWER CO LTD and FUJIAN AONONG BIOLOGICAL TECHN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJIAN AONONG BIOLOG and WUXI NCE 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 WUXI NCE POWER are associated (or correlated) with FUJIAN AONONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJIAN AONONG BIOLOG has no effect on the direction of WUXI NCE i.e., WUXI NCE and FUJIAN AONONG go up and down completely randomly.

Pair Corralation between WUXI NCE and FUJIAN AONONG

Assuming the 90 days trading horizon WUXI NCE POWER is expected to generate 0.85 times more return on investment than FUJIAN AONONG. However, WUXI NCE POWER is 1.17 times less risky than FUJIAN AONONG. It trades about 0.05 of its potential returns per unit of risk. FUJIAN AONONG BIOLOGICAL is currently generating about -0.02 per unit of risk. If you would invest  8,547  in WUXI NCE POWER on August 31, 2022 and sell it today you would earn a total of  122.00  from holding WUXI NCE POWER or generate 1.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

WUXI NCE POWER CO LTD  vs.  FUJIAN AONONG BIOLOGICAL TECHN

 Performance (%) 
       Timeline  
WUXI NCE POWER 
605111 Performance
0 of 100
Over the last 90 days WUXI NCE POWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

605111 Price Channel

FUJIAN AONONG BIOLOG 
FUJIAN Performance
0 of 100
Over the last 90 days FUJIAN AONONG BIOLOGICAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

FUJIAN Price Channel

WUXI NCE and FUJIAN AONONG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WUXI NCE and FUJIAN AONONG

The main advantage of trading using opposite WUXI NCE and FUJIAN AONONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WUXI NCE position performs unexpectedly, FUJIAN AONONG 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 FUJIAN AONONG will offset losses from the drop in FUJIAN AONONG's long position.
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The idea behind WUXI NCE POWER and FUJIAN AONONG BIOLOGICAL 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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