Correlation Between China Minmetals and Ningbo Fujia

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

By analyzing existing cross correlation between China Minmetals Rare and Ningbo Fujia Industrial, you can compare the effects of market volatilities on China Minmetals and Ningbo Fujia 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 China Minmetals with a short position of Ningbo Fujia. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minmetals and Ningbo Fujia.

Diversification Opportunities for China Minmetals and Ningbo Fujia

-0.13

Correlation Coefficient

China Minmetals  Ningbo Fujia

Good diversification

The 3 months correlation between China and Ningbo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Ningbo Fujia Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fujia Industrial and China Minmetals 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 China Minmetals Rare are associated (or correlated) with Ningbo Fujia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fujia Industrial has no effect on the direction of China Minmetals i.e., China Minmetals and Ningbo Fujia go up and down completely randomly.

Pair Corralation between China Minmetals and Ningbo Fujia

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the Ningbo Fujia. But the stock apears to be less risky and, when comparing its historical volatility, China Minmetals Rare is 1.8 times less risky than Ningbo Fujia. The stock trades about -0.01 of its potential returns per unit of risk. The Ningbo Fujia Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,466  in Ningbo Fujia Industrial on October 26, 2024 and sell it today you would earn a total of  31.00  from holding Ningbo Fujia Industrial or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

China Minmetals Rare  vs.  Ningbo Fujia Industrial

China Minmetals Rare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ningbo Fujia Industrial

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with China Minmetals and Ningbo Fujia

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

The idea behind China Minmetals Rare and Ningbo Fujia Industrial 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..