Correlation Between Ningbo GQY and Lutian Machinery

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

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

Diversification Opportunities for Ningbo GQY and Lutian Machinery

0.66

Correlation Coefficient

Ningbo GQY  Lutian Machinery

Poor diversification

The 3 months correlation between Ningbo and Lutian is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo GQY Video and Lutian Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lutian Machinery and Ningbo GQY 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 Ningbo GQY Video are associated (or correlated) with Lutian Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lutian Machinery has no effect on the direction of Ningbo GQY i.e., Ningbo GQY and Lutian Machinery go up and down completely randomly.

Pair Corralation between Ningbo GQY and Lutian Machinery

Assuming the 90 days trading horizon Ningbo GQY Video is expected to generate 4.34 times more return on investment than Lutian Machinery. However, Ningbo GQY is 4.34 times more volatile than Lutian Machinery Co. It trades about -0.05 of its potential returns per unit of risk. Lutian Machinery Co is currently generating about -0.22 per unit of risk. If you would invest  738.00  in Ningbo GQY Video on October 7, 2024 and sell it today you would lose (86.00) from holding Ningbo GQY Video or give up 11.65% of portfolio value over 90 days.

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

Ningbo GQY Video  vs.  Lutian Machinery Co

Ningbo GQY Video

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo GQY Video are ranked lower than 4 (%) 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.

Lutian Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningbo GQY and Lutian Machinery

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

The idea behind Ningbo GQY Video and Lutian Machinery 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .