Correlation Between Ningbo MedicalSystem and Guilin Seamild

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

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

Diversification Opportunities for Ningbo MedicalSystem and Guilin Seamild

0.32

Correlation Coefficient

Ningbo MedicalSystem  Guilin Seamild

Weak diversification

The 3 months correlation between Ningbo and Guilin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo MedicalSystem Biotechno and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild Foods and Ningbo MedicalSystem 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 MedicalSystem Biotechnology are associated (or correlated) with Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Ningbo MedicalSystem i.e., Ningbo MedicalSystem and Guilin Seamild go up and down completely randomly.

Pair Corralation between Ningbo MedicalSystem and Guilin Seamild

Assuming the 90 days trading horizon Ningbo MedicalSystem Biotechnology is expected to generate 0.76 times more return on investment than Guilin Seamild. However, Ningbo MedicalSystem Biotechnology is 1.31 times less risky than Guilin Seamild. It trades about 0.02 of its potential returns per unit of risk. Guilin Seamild Foods is currently generating about 0.01 per unit of risk. If you would invest  1,098  in Ningbo MedicalSystem Biotechnology on December 24, 2024 and sell it today you would earn a total of  14.00  from holding Ningbo MedicalSystem Biotechnology or generate 1.28% return on investment over 90 days.

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

Ningbo MedicalSystem Biotechno  vs.  Guilin Seamild Foods

Ningbo MedicalSystem

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo MedicalSystem Biotechnology are ranked lower than 1 (%) 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.

Guilin Seamild Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guilin Seamild Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guilin Seamild 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 MedicalSystem and Guilin Seamild

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

The idea behind Ningbo MedicalSystem Biotechnology and Guilin Seamild Foods 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.