Correlation Between Shenzhen Coship and Ningbo Tip

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

By analyzing existing cross correlation between Shenzhen Coship Electronics and Ningbo Tip Rubber, you can compare the effects of market volatilities on Shenzhen Coship and Ningbo Tip 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 Shenzhen Coship with a short position of Ningbo Tip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Coship and Ningbo Tip.

Diversification Opportunities for Shenzhen Coship and Ningbo Tip

0.19

Correlation Coefficient

Shenzhen Coship  Ningbo Tip

Average diversification

The 3 months correlation between Shenzhen and Ningbo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Ningbo Tip Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tip Rubber and Shenzhen Coship 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 Shenzhen Coship Electronics are associated (or correlated) with Ningbo Tip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tip Rubber has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Ningbo Tip go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Ningbo Tip

Assuming the 90 days trading horizon Shenzhen Coship is expected to generate 1.09 times less return on investment than Ningbo Tip. In addition to that, Shenzhen Coship is 1.2 times more volatile than Ningbo Tip Rubber. It trades about 0.08 of its total potential returns per unit of risk. Ningbo Tip Rubber is currently generating about 0.11 per unit of volatility. If you would invest  1,256  in Ningbo Tip Rubber on October 23, 2024 and sell it today you would earn a total of  71.00  from holding Ningbo Tip Rubber or generate 5.65% return on investment over 90 days.

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

Shenzhen Coship Electronics  vs.  Ningbo Tip Rubber

Shenzhen Coship Elec

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Coship sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Tip Rubber

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tip Rubber are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tip may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Coship and Ningbo Tip

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

The idea behind Shenzhen Coship Electronics and Ningbo Tip Rubber 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.