Correlation Between Nongfu Spring and AllovirInc

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

By analyzing existing cross correlation between Nongfu Spring Co and AllovirInc, you can compare the effects of market volatilities on Nongfu Spring and AllovirInc 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 Nongfu Spring with a short position of AllovirInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nongfu Spring and AllovirInc.

Diversification Opportunities for Nongfu Spring and AllovirInc

-0.56

Correlation Coefficient

Nongfu Spring  AllovirInc

Excellent diversification

The 3 months correlation between Nongfu and AllovirInc is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nongfu Spring Co and AllovirInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllovirInc and Nongfu Spring 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 Nongfu Spring Co are associated (or correlated) with AllovirInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllovirInc has no effect on the direction of Nongfu Spring i.e., Nongfu Spring and AllovirInc go up and down completely randomly.

Pair Corralation between Nongfu Spring and AllovirInc

Assuming the 90 days horizon Nongfu Spring Co is expected to generate 0.42 times more return on investment than AllovirInc. However, Nongfu Spring Co is 2.4 times less risky than AllovirInc. It trades about 0.22 of its potential returns per unit of risk. AllovirInc is currently generating about 0.08 per unit of risk. If you would invest  547.00  in Nongfu Spring Co on January 25, 2024 and sell it today you would earn a total of  27.00  from holding Nongfu Spring Co or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nongfu Spring Co  vs.  AllovirInc

Nongfu Spring

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nongfu Spring is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AllovirInc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AllovirInc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AllovirInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nongfu Spring and AllovirInc

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

The idea behind Nongfu Spring Co and AllovirInc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.