Correlation Between Zhongshan Public and Ningxia Building

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

By analyzing existing cross correlation between Zhongshan Public Utilities and Ningxia Building Materials, you can compare the effects of market volatilities on Zhongshan Public and Ningxia Building 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 Zhongshan Public with a short position of Ningxia Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Public and Ningxia Building.

Diversification Opportunities for Zhongshan Public and Ningxia Building

0.52

Correlation Coefficient

Zhongshan Public  Ningxia Building

Very weak diversification

The 3 months correlation between Zhongshan and Ningxia is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat and Zhongshan Public 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 Zhongshan Public Utilities are associated (or correlated) with Ningxia Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Ningxia Building go up and down completely randomly.

Pair Corralation between Zhongshan Public and Ningxia Building

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 0.54 times more return on investment than Ningxia Building. However, Zhongshan Public Utilities is 1.87 times less risky than Ningxia Building. It trades about 0.02 of its potential returns per unit of risk. Ningxia Building Materials is currently generating about -0.06 per unit of risk. If you would invest  871.00  in Zhongshan Public Utilities on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Zhongshan Public Utilities or generate 1.38% return on investment over 90 days.

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

Zhongshan Public Utilities  vs.  Ningxia Building Materials

Zhongshan Public Uti

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongshan Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ningxia Building Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zhongshan Public and Ningxia Building

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

The idea behind Zhongshan Public Utilities and Ningxia Building Materials 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.