Correlation Between Henan Shuanghui and Ningbo Homelink

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

By analyzing existing cross correlation between Henan Shuanghui Investment and Ningbo Homelink Eco iTech, you can compare the effects of market volatilities on Henan Shuanghui and Ningbo Homelink 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 Henan Shuanghui with a short position of Ningbo Homelink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shuanghui and Ningbo Homelink.

Diversification Opportunities for Henan Shuanghui and Ningbo Homelink

0.83

Correlation Coefficient

Henan Shuanghui  Ningbo Homelink

Very poor diversification

The 3 months correlation between Henan and Ningbo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and Ningbo Homelink Eco iTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Homelink Eco and Henan Shuanghui 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 Henan Shuanghui Investment are associated (or correlated) with Ningbo Homelink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Homelink Eco has no effect on the direction of Henan Shuanghui i.e., Henan Shuanghui and Ningbo Homelink go up and down completely randomly.

Pair Corralation between Henan Shuanghui and Ningbo Homelink

Assuming the 90 days trading horizon Henan Shuanghui is expected to generate 2.77 times less return on investment than Ningbo Homelink. But when comparing it to its historical volatility, Henan Shuanghui Investment is 1.82 times less risky than Ningbo Homelink. It trades about 0.09 of its potential returns per unit of risk. Ningbo Homelink Eco iTech is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,366  in Ningbo Homelink Eco iTech on September 4, 2024 and sell it today you would earn a total of  379.00  from holding Ningbo Homelink Eco iTech or generate 27.75% return on investment over 90 days.

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

Henan Shuanghui Investment  vs.  Ningbo Homelink Eco iTech

Henan Shuanghui Inve

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shuanghui Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shuanghui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ningbo Homelink Eco

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Homelink Eco iTech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Homelink sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henan Shuanghui and Ningbo Homelink

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

The idea behind Henan Shuanghui Investment and Ningbo Homelink Eco iTech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.