Correlation Between Hunan TV and Ningbo Fangzheng

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Can any of the company-specific risk be diversified away by investing in both Hunan TV and Ningbo Fangzheng 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 Hunan TV and Ningbo Fangzheng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hunan TV Broadcast and Ningbo Fangzheng Automobile, you can compare the effects of market volatilities on Hunan TV and Ningbo Fangzheng 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 Hunan TV with a short position of Ningbo Fangzheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Ningbo Fangzheng.

Diversification Opportunities for Hunan TV and Ningbo Fangzheng

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Hunan and Ningbo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Ningbo Fangzheng Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fangzheng Aut and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Ningbo Fangzheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fangzheng Aut has no effect on the direction of Hunan TV i.e., Hunan TV and Ningbo Fangzheng go up and down completely randomly.

Pair Corralation between Hunan TV and Ningbo Fangzheng

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to generate 1.06 times more return on investment than Ningbo Fangzheng. However, Hunan TV is 1.06 times more volatile than Ningbo Fangzheng Automobile. It trades about 0.03 of its potential returns per unit of risk. Ningbo Fangzheng Automobile is currently generating about -0.02 per unit of risk. If you would invest  529.00  in Hunan TV Broadcast on October 10, 2024 and sell it today you would earn a total of  132.00  from holding Hunan TV Broadcast or generate 24.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hunan TV Broadcast  vs.  Ningbo Fangzheng Automobile

 Performance 
       Timeline  
Hunan TV Broadcast 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV sustained solid returns over the last few months and may actually be approaching a breakup point.
Ningbo Fangzheng Aut 

Risk-Adjusted Performance

0 of 100

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

Hunan TV and Ningbo Fangzheng Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hunan TV and Ningbo Fangzheng

The main advantage of trading using opposite Hunan TV and Ningbo Fangzheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan TV position performs unexpectedly, Ningbo Fangzheng 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 Fangzheng will offset losses from the drop in Ningbo Fangzheng's long position.
The idea behind Hunan TV Broadcast and Ningbo Fangzheng Automobile 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.
Check out your portfolio center.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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