Correlation Between HeNan Splendor and Ningbo Tech

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

By analyzing existing cross correlation between HeNan Splendor Science and Ningbo Tech Bank Co, you can compare the effects of market volatilities on HeNan Splendor and Ningbo Tech 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 HeNan Splendor with a short position of Ningbo Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeNan Splendor and Ningbo Tech.

Diversification Opportunities for HeNan Splendor and Ningbo Tech

0.29

Correlation Coefficient

HeNan Splendor  Ningbo Tech

Modest diversification

The 3 months correlation between HeNan and Ningbo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding HeNan Splendor Science and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank and HeNan Splendor 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 HeNan Splendor Science are associated (or correlated) with Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of HeNan Splendor i.e., HeNan Splendor and Ningbo Tech go up and down completely randomly.

Pair Corralation between HeNan Splendor and Ningbo Tech

Assuming the 90 days trading horizon HeNan Splendor Science is expected to generate 1.67 times more return on investment than Ningbo Tech. However, HeNan Splendor is 1.67 times more volatile than Ningbo Tech Bank Co. It trades about 0.07 of its potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about -0.11 per unit of risk. If you would invest  1,022  in HeNan Splendor Science on December 4, 2024 and sell it today you would earn a total of  108.00  from holding HeNan Splendor Science or generate 10.57% return on investment over 90 days.

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

HeNan Splendor Science  vs.  Ningbo Tech Bank Co

HeNan Splendor Science

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeNan Splendor sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Tech Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningbo Tech Bank Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HeNan Splendor and Ningbo Tech

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

The idea behind HeNan Splendor Science and Ningbo Tech Bank Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.