Correlation Between Shandong Mining and Ningbo GQY

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

By analyzing existing cross correlation between Shandong Mining Machinery and Ningbo GQY Video, you can compare the effects of market volatilities on Shandong Mining and Ningbo GQY 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 Shandong Mining with a short position of Ningbo GQY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Mining and Ningbo GQY.

Diversification Opportunities for Shandong Mining and Ningbo GQY

0.42

Correlation Coefficient

Shandong Mining  Ningbo GQY

Very weak diversification

The 3 months correlation between Shandong and Ningbo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Ningbo GQY Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo GQY Video and Shandong Mining 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 Shandong Mining Machinery are associated (or correlated) with Ningbo GQY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo GQY Video has no effect on the direction of Shandong Mining i.e., Shandong Mining and Ningbo GQY go up and down completely randomly.

Pair Corralation between Shandong Mining and Ningbo GQY

Assuming the 90 days trading horizon Shandong Mining is expected to generate 3.23 times less return on investment than Ningbo GQY. But when comparing it to its historical volatility, Shandong Mining Machinery is 1.23 times less risky than Ningbo GQY. It trades about 0.09 of its potential returns per unit of risk. Ningbo GQY Video is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  678.00  in Ningbo GQY Video on December 3, 2024 and sell it today you would earn a total of  167.00  from holding Ningbo GQY Video or generate 24.63% return on investment over 90 days.

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

Shandong Mining Machinery  vs.  Ningbo GQY Video

Shandong Mining Machinery

Risk-Adjusted Performance

Very Weak

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

Ningbo GQY Video

Risk-Adjusted Performance

Modest

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

Pair Trading with Shandong Mining and Ningbo GQY

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

The idea behind Shandong Mining Machinery and Ningbo GQY Video 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.