Correlation Between Hunan Fangsheng and Nanxing Furniture

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Hunan Fangsheng and Nanxing Furniture 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 Hunan Fangsheng and Nanxing Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hunan Fangsheng Pharm and Nanxing Furniture Machinery, you can compare the effects of market volatilities on Hunan Fangsheng 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 Hunan Fangsheng with a short position of Nanxing Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Fangsheng and Nanxing Furniture.

Diversification Opportunities for Hunan Fangsheng and Nanxing Furniture

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hunan and Nanxing is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Fangsheng Pharm and Nanxing Furniture Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanxing Furniture and Hunan Fangsheng 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 Hunan Fangsheng Pharm 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 Hunan Fangsheng i.e., Hunan Fangsheng and Nanxing Furniture go up and down completely randomly.

Pair Corralation between Hunan Fangsheng and Nanxing Furniture

Assuming the 90 days trading horizon Hunan Fangsheng Pharm is expected to under-perform the Nanxing Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Hunan Fangsheng Pharm is 1.65 times less risky than Nanxing Furniture. The stock trades about -0.18 of its potential returns per unit of risk. The Nanxing Furniture Machinery is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Nanxing Furniture Machinery on October 23, 2024 and sell it today you would lose (144.00) from holding Nanxing Furniture Machinery or give up 9.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hunan Fangsheng Pharm  vs.  Nanxing Furniture Machinery

 Performance 
       Timeline  
Hunan Fangsheng Pharm 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hunan Fangsheng Pharm 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Nanxing Furniture 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Nanxing Furniture Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanxing Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hunan Fangsheng and Nanxing Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hunan Fangsheng and Nanxing Furniture

The main advantage of trading using opposite Hunan Fangsheng and Nanxing Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Fangsheng 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 Hunan Fangsheng Pharm 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.
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

Other Complementary Tools

Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities