Correlation Between Ningbo Tech and Tianshui Huatian

Can any of the company-specific risk be diversified away by investing in both Ningbo Tech and Tianshui Huatian 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 Tianshui Huatian 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 Tianshui Huatian Technology, you can compare the effects of market volatilities on Ningbo Tech and Tianshui Huatian 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 Tianshui Huatian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Tech and Tianshui Huatian.

Diversification Opportunities for Ningbo Tech and Tianshui Huatian

0.8

Correlation Coefficient

Ningbo Tech  Tianshui Huatian

Very poor diversification

The 3 months correlation between Ningbo and Tianshui is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec 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 Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Tianshui Huatian go up and down completely randomly.

Pair Corralation between Ningbo Tech and Tianshui Huatian

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Tianshui Huatian. In addition to that, Ningbo Tech is 1.06 times more volatile than Tianshui Huatian Technology. It trades about -0.01 of its total potential returns per unit of risk. Tianshui Huatian Technology is currently generating about 0.06 per unit of volatility. If you would invest  768.00  in Tianshui Huatian Technology on October 9, 2024 and sell it today you would earn a total of  320.00  from holding Tianshui Huatian Technology or generate 41.67% return on investment over 90 days.

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

Ningbo Tech Bank Co  vs.  Tianshui Huatian Technology

Ningbo Tech Bank

Risk-Adjusted Performance

8 of 100

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.

Tianshui Huatian Tec

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tianshui Huatian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ningbo Tech and Tianshui Huatian

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

The idea behind Ningbo Tech Bank Co and Tianshui Huatian Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.