Correlation Between Shenzhen Glory and Ningbo Kangqiang

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

By analyzing existing cross correlation between Shenzhen Glory Medical and Ningbo Kangqiang Electronics, you can compare the effects of market volatilities on Shenzhen Glory and Ningbo Kangqiang 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 Shenzhen Glory with a short position of Ningbo Kangqiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Glory and Ningbo Kangqiang.

Diversification Opportunities for Shenzhen Glory and Ningbo Kangqiang

-0.1

Correlation Coefficient

Shenzhen Glory  Ningbo Kangqiang

Good diversification

The 3 months correlation between Shenzhen and Ningbo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Ningbo Kangqiang Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Kangqiang Ele and Shenzhen Glory 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 Shenzhen Glory Medical are associated (or correlated) with Ningbo Kangqiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Kangqiang Ele has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Ningbo Kangqiang go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Ningbo Kangqiang

Assuming the 90 days trading horizon Shenzhen Glory is expected to generate 1.13 times less return on investment than Ningbo Kangqiang. But when comparing it to its historical volatility, Shenzhen Glory Medical is 1.75 times less risky than Ningbo Kangqiang. It trades about 0.05 of its potential returns per unit of risk. Ningbo Kangqiang Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,592  in Ningbo Kangqiang Electronics on December 26, 2024 and sell it today you would earn a total of  44.00  from holding Ningbo Kangqiang Electronics or generate 2.76% return on investment over 90 days.

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

Shenzhen Glory Medical  vs.  Ningbo Kangqiang Electronics

Shenzhen Glory Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ningbo Kangqiang Ele

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Kangqiang Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Kangqiang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen Glory and Ningbo Kangqiang

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

The idea behind Shenzhen Glory Medical and Ningbo Kangqiang Electronics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.