Correlation Between Ningbo Kangqiang and Tongling Nonferrous

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

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

Diversification Opportunities for Ningbo Kangqiang and Tongling Nonferrous

-0.42

Correlation Coefficient

Ningbo Kangqiang  Tongling Nonferrous

Very good diversification

The 3 months correlation between Ningbo and Tongling is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Kangqiang Electronics and Tongling Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongling Nonferrous and Ningbo Kangqiang 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 Ningbo Kangqiang Electronics are associated (or correlated) with Tongling Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongling Nonferrous has no effect on the direction of Ningbo Kangqiang i.e., Ningbo Kangqiang and Tongling Nonferrous go up and down completely randomly.

Pair Corralation between Ningbo Kangqiang and Tongling Nonferrous

Assuming the 90 days trading horizon Ningbo Kangqiang Electronics is expected to generate 2.21 times more return on investment than Tongling Nonferrous. However, Ningbo Kangqiang is 2.21 times more volatile than Tongling Nonferrous Metals. It trades about 0.08 of its potential returns per unit of risk. Tongling Nonferrous Metals is currently generating about -0.06 per unit of risk. If you would invest  1,395  in Ningbo Kangqiang Electronics on October 9, 2024 and sell it today you would earn a total of  214.00  from holding Ningbo Kangqiang Electronics or generate 15.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ningbo Kangqiang Electronics  vs.  Tongling Nonferrous Metals

Ningbo Kangqiang Ele

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Kangqiang Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Kangqiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Tongling Nonferrous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tongling Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ningbo Kangqiang and Tongling Nonferrous

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

The idea behind Ningbo Kangqiang Electronics and Tongling Nonferrous Metals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.