Correlation Between Gansu Huangtai and Ningbo Thermal

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

By analyzing existing cross correlation between Gansu Huangtai Wine marketing and Ningbo Thermal Power, you can compare the effects of market volatilities on Gansu Huangtai and Ningbo Thermal 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 Gansu Huangtai with a short position of Ningbo Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Ningbo Thermal.

Diversification Opportunities for Gansu Huangtai and Ningbo Thermal

0.82

Correlation Coefficient

Gansu Huangtai  Ningbo Thermal

Very poor diversification

The 3 months correlation between Gansu and Ningbo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Ningbo Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Thermal Power and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Ningbo Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Thermal Power has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Ningbo Thermal go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Ningbo Thermal

Assuming the 90 days trading horizon Gansu Huangtai is expected to generate 1.1 times less return on investment than Ningbo Thermal. In addition to that, Gansu Huangtai is 1.76 times more volatile than Ningbo Thermal Power. It trades about 0.17 of its total potential returns per unit of risk. Ningbo Thermal Power is currently generating about 0.34 per unit of volatility. If you would invest  332.00  in Ningbo Thermal Power on September 21, 2024 and sell it today you would earn a total of  243.00  from holding Ningbo Thermal Power or generate 73.19% return on investment over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Ningbo Thermal Power

Gansu Huangtai Wine

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Thermal Power

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Thermal Power are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Thermal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Huangtai and Ningbo Thermal

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

The idea behind Gansu Huangtai Wine marketing and Ningbo Thermal Power 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.