Correlation Between Ningbo Tech and Zhejiang Yayi

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

Diversification Opportunities for Ningbo Tech and Zhejiang Yayi

0.66

Correlation Coefficient

Ningbo Tech  Zhejiang Yayi

Poor diversification

The 3 months correlation between Ningbo and Zhejiang is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Zhejiang Yayi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Yayi Metal 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 Zhejiang Yayi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Yayi Metal has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Zhejiang Yayi go up and down completely randomly.

Pair Corralation between Ningbo Tech and Zhejiang Yayi

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Zhejiang Yayi. But the stock apears to be less risky and, when comparing its historical volatility, Ningbo Tech Bank Co is 2.26 times less risky than Zhejiang Yayi. The stock trades about -0.37 of its potential returns per unit of risk. The Zhejiang Yayi Metal is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,686  in Zhejiang Yayi Metal on October 8, 2024 and sell it today you would lose (320.00) from holding Zhejiang Yayi Metal or give up 11.91% of portfolio value over 90 days.

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

Ningbo Tech Bank Co  vs.  Zhejiang Yayi Metal

Ningbo Tech Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 6 (%) 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.

Zhejiang Yayi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Yayi Metal 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 Tech and Zhejiang Yayi

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

The idea behind Ningbo Tech Bank Co and Zhejiang Yayi Metal 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.