Correlation Between XinJiang GuoTong and Ningbo Fujia

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

By analyzing existing cross correlation between XinJiang GuoTong Pipeline and Ningbo Fujia Industrial, you can compare the effects of market volatilities on XinJiang GuoTong and Ningbo Fujia 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 XinJiang GuoTong with a short position of Ningbo Fujia. Check out your portfolio center. Please also check ongoing floating volatility patterns of XinJiang GuoTong and Ningbo Fujia.

Diversification Opportunities for XinJiang GuoTong and Ningbo Fujia

0.42

Correlation Coefficient

XinJiang GuoTong  Ningbo Fujia

Very weak diversification

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

Pair Corralation between XinJiang GuoTong and Ningbo Fujia

Assuming the 90 days trading horizon XinJiang GuoTong Pipeline is expected to under-perform the Ningbo Fujia. In addition to that, XinJiang GuoTong is 1.6 times more volatile than Ningbo Fujia Industrial. It trades about -0.13 of its total potential returns per unit of risk. Ningbo Fujia Industrial is currently generating about -0.07 per unit of volatility. If you would invest  1,438  in Ningbo Fujia Industrial on October 6, 2024 and sell it today you would lose (79.00) from holding Ningbo Fujia Industrial or give up 5.49% of portfolio value over 90 days.

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

XinJiang GuoTong Pipeline  vs.  Ningbo Fujia Industrial

XinJiang GuoTong Pipeline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XinJiang GuoTong Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, XinJiang GuoTong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ningbo Fujia Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Fujia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningbo Fujia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with XinJiang GuoTong and Ningbo Fujia

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

The idea behind XinJiang GuoTong Pipeline and Ningbo Fujia Industrial 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.