Correlation Between Ningbo Tech and Inner Mongolia

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

Diversification Opportunities for Ningbo Tech and Inner Mongolia

0.66

Correlation Coefficient

Ningbo Tech  Inner Mongolia

Poor diversification

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

Pair Corralation between Ningbo Tech and Inner Mongolia

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to generate 1.78 times more return on investment than Inner Mongolia. However, Ningbo Tech is 1.78 times more volatile than Inner Mongolia Yitai. It trades about 0.26 of its potential returns per unit of risk. Inner Mongolia Yitai is currently generating about 0.14 per unit of risk. If you would invest  213.00  in Ningbo Tech Bank Co on September 14, 2024 and sell it today you would earn a total of  103.00  from holding Ningbo Tech Bank Co or generate 48.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Ningbo Tech Bank Co  vs.  Inner Mongolia Yitai

Ningbo Tech Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 20 (%) 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.

Inner Mongolia Yitai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia Yitai are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inner Mongolia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Tech and Inner Mongolia

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

The idea behind Ningbo Tech Bank Co and Inner Mongolia Yitai 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.