Correlation Between Ningbo Tech and Fujian Newland

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

Diversification Opportunities for Ningbo Tech and Fujian Newland

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ningbo and Fujian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Fujian Newland Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Newland Computer and Ningbo Tech 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 Tech Bank Co are associated (or correlated) with Fujian Newland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Newland Computer has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Fujian Newland go up and down completely randomly.

Pair Corralation between Ningbo Tech and Fujian Newland

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Fujian Newland. In addition to that, Ningbo Tech is 1.0 times more volatile than Fujian Newland Computer. It trades about -0.01 of its total potential returns per unit of risk. Fujian Newland Computer is currently generating about 0.04 per unit of volatility. If you would invest  1,604  in Fujian Newland Computer on October 9, 2024 and sell it today you would earn a total of  188.00  from holding Fujian Newland Computer or generate 11.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ningbo Tech Bank Co  vs.  Fujian Newland Computer

 Performance 
       Timeline  
Ningbo Tech Bank 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.
Fujian Newland Computer 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Newland Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Newland may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ningbo Tech and Fujian Newland Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ningbo Tech and Fujian Newland

The main advantage of trading using opposite Ningbo Tech and Fujian Newland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Tech position performs unexpectedly, Fujian Newland 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 Fujian Newland will offset losses from the drop in Fujian Newland's long position.
The idea behind Ningbo Tech Bank Co and Fujian Newland Computer 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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