Correlation Between Huasi Agricultural and Ningbo MedicalSystem

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

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

Diversification Opportunities for Huasi Agricultural and Ningbo MedicalSystem

0.78

Correlation Coefficient

Huasi Agricultural  Ningbo MedicalSystem

Poor diversification

The 3 months correlation between Huasi and Ningbo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and Huasi Agricultural 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 Huasi Agricultural Development 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 Huasi Agricultural i.e., Huasi Agricultural and Ningbo MedicalSystem go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Ningbo MedicalSystem

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to generate 1.25 times more return on investment than Ningbo MedicalSystem. However, Huasi Agricultural is 1.25 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about 0.08 of its potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.03 per unit of risk. If you would invest  388.00  in Huasi Agricultural Development on December 25, 2024 and sell it today you would earn a total of  36.00  from holding Huasi Agricultural Development or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Huasi Agricultural Development  vs.  Ningbo MedicalSystem Biotechno

Huasi Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ningbo MedicalSystem

Risk-Adjusted Performance

Very 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 Huasi Agricultural and Ningbo MedicalSystem

The main advantage of trading using opposite Huasi Agricultural and Ningbo MedicalSystem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huasi Agricultural 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 Huasi Agricultural Development 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.