Correlation Between Ningbo Ligong and GEM

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

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

Diversification Opportunities for Ningbo Ligong and GEM

0.3

Correlation Coefficient

Ningbo Ligong  GEM

Weak diversification

The 3 months correlation between Ningbo and GEM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Ligong Online and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co and Ningbo Ligong 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 Ligong Online are associated (or correlated) with GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Ningbo Ligong i.e., Ningbo Ligong and GEM go up and down completely randomly.

Pair Corralation between Ningbo Ligong and GEM

Assuming the 90 days trading horizon Ningbo Ligong Online is expected to under-perform the GEM. In addition to that, Ningbo Ligong is 1.06 times more volatile than GEM Co. It trades about -0.04 of its total potential returns per unit of risk. GEM Co is currently generating about 0.03 per unit of volatility. If you would invest  627.00  in GEM Co on September 30, 2024 and sell it today you would earn a total of  39.00  from holding GEM Co or generate 6.22% return on investment over 90 days.

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

Ningbo Ligong Online  vs.  GEM Co

Ningbo Ligong Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Ligong Online 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.

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningbo Ligong and GEM

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

The idea behind Ningbo Ligong Online and GEM 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.