Correlation Between SohuCom and Nongfu Spring

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

Diversification Opportunities for SohuCom and Nongfu Spring

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between SohuCom and Nongfu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SohuCom and Nongfu Spring Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongfu Spring and SohuCom 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 SohuCom are associated (or correlated) with Nongfu Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongfu Spring has no effect on the direction of SohuCom i.e., SohuCom and Nongfu Spring go up and down completely randomly.

Pair Corralation between SohuCom and Nongfu Spring

Given the investment horizon of 90 days SohuCom is expected to generate 1.32 times more return on investment than Nongfu Spring. However, SohuCom is 1.32 times more volatile than Nongfu Spring Co. It trades about 0.01 of its potential returns per unit of risk. Nongfu Spring Co is currently generating about 0.0 per unit of risk. If you would invest  1,580  in SohuCom on September 2, 2022 and sell it today you would lose (102.00)  from holding SohuCom or give up 6.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

SohuCom  vs.  Nongfu Spring Co

 Performance (%) 
       Timeline  
SohuCom 
SohuCom Performance
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Over the last 90 days SohuCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SohuCom Price Channel

Nongfu Spring 
Nongfu Performance
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Over the last 90 days Nongfu Spring Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nongfu Spring is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nongfu Price Channel

SohuCom and Nongfu Spring Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SohuCom and Nongfu Spring

The main advantage of trading using opposite SohuCom and Nongfu Spring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SohuCom position performs unexpectedly, Nongfu Spring 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 Nongfu Spring will offset losses from the drop in Nongfu Spring's long position.
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The idea behind SohuCom and Nongfu Spring Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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