Correlation Between Guangdong Shenglu and Ningbo MedicalSystem

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

By analyzing existing cross correlation between Guangdong Shenglu Telecommunication and Ningbo MedicalSystem Biotechnology, you can compare the effects of market volatilities on Guangdong Shenglu and Ningbo MedicalSystem 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 Guangdong Shenglu with a short position of Ningbo MedicalSystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and Ningbo MedicalSystem.

Diversification Opportunities for Guangdong Shenglu and Ningbo MedicalSystem

0.65

Correlation Coefficient

Guangdong Shenglu  Ningbo MedicalSystem

Poor diversification

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

Pair Corralation between Guangdong Shenglu and Ningbo MedicalSystem

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to under-perform the Ningbo MedicalSystem. In addition to that, Guangdong Shenglu is 1.46 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about -0.02 of its total potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.03 per unit of volatility. If you would invest  1,097  in Ningbo MedicalSystem Biotechnology on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Ningbo MedicalSystem Biotechnology or generate 1.73% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Ningbo MedicalSystem Biotechno

Guangdong Shenglu

Risk-Adjusted Performance

Very Weak

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

Ningbo MedicalSystem

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo MedicalSystem Biotechnology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo MedicalSystem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Shenglu and Ningbo MedicalSystem

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

The idea behind Guangdong Shenglu Telecommunication and Ningbo MedicalSystem Biotechnology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.