Correlation Between ZJBC Information and Ningbo Fujia

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

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

Diversification Opportunities for ZJBC Information and Ningbo Fujia

0.63

Correlation Coefficient

ZJBC Information  Ningbo Fujia

Poor diversification

The 3 months correlation between ZJBC and Ningbo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ZJBC Information Technology 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 ZJBC Information 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 ZJBC Information Technology 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 ZJBC Information i.e., ZJBC Information and Ningbo Fujia go up and down completely randomly.

Pair Corralation between ZJBC Information and Ningbo Fujia

Assuming the 90 days trading horizon ZJBC Information is expected to generate 1.13 times less return on investment than Ningbo Fujia. But when comparing it to its historical volatility, ZJBC Information Technology is 1.1 times less risky than Ningbo Fujia. It trades about 0.04 of its potential returns per unit of risk. Ningbo Fujia Industrial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,078  in Ningbo Fujia Industrial on September 28, 2024 and sell it today you would earn a total of  390.00  from holding Ningbo Fujia Industrial or generate 36.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

ZJBC Information Technology  vs.  Ningbo Fujia Industrial

ZJBC Information Tec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Fujia Industrial

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with ZJBC Information and Ningbo Fujia

The main advantage of trading using opposite ZJBC Information and Ningbo Fujia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZJBC Information 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 ZJBC Information Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.