Correlation Between Shenzhen Silver and Ningbo Tech

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

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

Diversification Opportunities for Shenzhen Silver and Ningbo Tech

0.68

Correlation Coefficient

Shenzhen Silver  Ningbo Tech

Poor diversification

The 3 months correlation between Shenzhen and Ningbo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Silver Basis and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank and Shenzhen Silver 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 Silver Basis are associated (or correlated) with Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of Shenzhen Silver i.e., Shenzhen Silver and Ningbo Tech go up and down completely randomly.

Pair Corralation between Shenzhen Silver and Ningbo Tech

Assuming the 90 days trading horizon Shenzhen Silver Basis is expected to under-perform the Ningbo Tech. In addition to that, Shenzhen Silver is 1.54 times more volatile than Ningbo Tech Bank Co. It trades about -0.17 of its total potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about -0.1 per unit of volatility. If you would invest  332.00  in Ningbo Tech Bank Co on September 13, 2024 and sell it today you would lose (16.00) from holding Ningbo Tech Bank Co or give up 4.82% of portfolio value over 90 days.

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

Shenzhen Silver Basis  vs.  Ningbo Tech Bank Co

Shenzhen Silver Basis

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Silver Basis are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Silver sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Tech Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Silver and Ningbo Tech

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

The idea behind Shenzhen Silver Basis and Ningbo Tech Bank 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.