Correlation Between Shenzhen Kaifa and Ningbo Bohui

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

By analyzing existing cross correlation between Shenzhen Kaifa Technology and Ningbo Bohui Chemical, you can compare the effects of market volatilities on Shenzhen Kaifa and Ningbo Bohui 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 Shenzhen Kaifa with a short position of Ningbo Bohui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Kaifa and Ningbo Bohui.

Diversification Opportunities for Shenzhen Kaifa and Ningbo Bohui

0.56

Correlation Coefficient

Shenzhen Kaifa  Ningbo Bohui

Very weak diversification

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

Pair Corralation between Shenzhen Kaifa and Ningbo Bohui

Assuming the 90 days trading horizon Shenzhen Kaifa Technology is expected to generate 1.14 times more return on investment than Ningbo Bohui. However, Shenzhen Kaifa is 1.14 times more volatile than Ningbo Bohui Chemical. It trades about 0.01 of its potential returns per unit of risk. Ningbo Bohui Chemical is currently generating about -0.08 per unit of risk. If you would invest  1,818  in Shenzhen Kaifa Technology on October 6, 2024 and sell it today you would lose (67.00) from holding Shenzhen Kaifa Technology or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Shenzhen Kaifa Technology  vs.  Ningbo Bohui Chemical

Shenzhen Kaifa Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Kaifa Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Kaifa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ningbo Bohui Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Bohui Chemical 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.

Pair Trading with Shenzhen Kaifa and Ningbo Bohui

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

The idea behind Shenzhen Kaifa Technology and Ningbo Bohui Chemical 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.