Correlation Between Hongrun Construction and Nanxing Furniture
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By analyzing existing cross correlation between Hongrun Construction Group and Nanxing Furniture Machinery, you can compare the effects of market volatilities on Hongrun Construction and Nanxing Furniture 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 Hongrun Construction with a short position of Nanxing Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongrun Construction and Nanxing Furniture.
Diversification Opportunities for Hongrun Construction and Nanxing Furniture
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hongrun and Nanxing is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group and Nanxing Furniture Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanxing Furniture and Hongrun Construction 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 Hongrun Construction Group are associated (or correlated) with Nanxing Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanxing Furniture has no effect on the direction of Hongrun Construction i.e., Hongrun Construction and Nanxing Furniture go up and down completely randomly.
Pair Corralation between Hongrun Construction and Nanxing Furniture
Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 0.59 times more return on investment than Nanxing Furniture. However, Hongrun Construction Group is 1.7 times less risky than Nanxing Furniture. It trades about 0.15 of its potential returns per unit of risk. Nanxing Furniture Machinery is currently generating about 0.04 per unit of risk. If you would invest 446.00 in Hongrun Construction Group on October 12, 2024 and sell it today you would earn a total of 78.00 from holding Hongrun Construction Group or generate 17.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hongrun Construction Group vs. Nanxing Furniture Machinery
Performance |
| Timeline |
| Hongrun Construction |
| Nanxing Furniture |
Hongrun Construction and Nanxing Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hongrun Construction and Nanxing Furniture
The main advantage of trading using opposite Hongrun Construction and Nanxing Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongrun Construction position performs unexpectedly, Nanxing Furniture 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 Nanxing Furniture will offset losses from the drop in Nanxing Furniture's long position.The idea behind Hongrun Construction Group and Nanxing Furniture Machinery 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 the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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