Correlation Between Shenzhen Topway and Ningxia Building

Can any of the company-specific risk be diversified away by investing in both Shenzhen Topway and Ningxia Building 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 Shenzhen Topway and Ningxia Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Topway Video and Ningxia Building Materials, you can compare the effects of market volatilities on Shenzhen Topway and Ningxia Building 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 Shenzhen Topway with a short position of Ningxia Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Topway and Ningxia Building.

Diversification Opportunities for Shenzhen Topway and Ningxia Building

0.65

Correlation Coefficient

Shenzhen Topway  Ningxia Building

Poor diversification

The 3 months correlation between Shenzhen and Ningxia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Topway Video and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat and Shenzhen Topway 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 Shenzhen Topway Video are associated (or correlated) with Ningxia Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Shenzhen Topway i.e., Shenzhen Topway and Ningxia Building go up and down completely randomly.

Pair Corralation between Shenzhen Topway and Ningxia Building

Assuming the 90 days trading horizon Shenzhen Topway Video is expected to generate 1.18 times more return on investment than Ningxia Building. However, Shenzhen Topway is 1.18 times more volatile than Ningxia Building Materials. It trades about 0.06 of its potential returns per unit of risk. Ningxia Building Materials is currently generating about 0.04 per unit of risk. If you would invest  835.00  in Shenzhen Topway Video on December 26, 2024 and sell it today you would earn a total of  68.00  from holding Shenzhen Topway Video or generate 8.14% return on investment over 90 days.

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

Shenzhen Topway Video  vs.  Ningxia Building Materials

Shenzhen Topway Video

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ningxia Building Mat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen Topway and Ningxia Building

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

The idea behind Shenzhen Topway Video and Ningxia Building Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.