Correlation Between Ningbo MedicalSystem and Zhangjiagang Freetrade

Can any of the company-specific risk be diversified away by investing in both Ningbo MedicalSystem and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science, you can compare the effects of market volatilities on Ningbo MedicalSystem and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo MedicalSystem and Zhangjiagang Freetrade.

Diversification Opportunities for Ningbo MedicalSystem and Zhangjiagang Freetrade

0.56

Correlation Coefficient

Ningbo MedicalSystem  Zhangjiagang Freetrade

Very weak diversification

The 3 months correlation between Ningbo and Zhangjiagang is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo MedicalSystem Biotechno and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Ningbo MedicalSystem i.e., Ningbo MedicalSystem and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Ningbo MedicalSystem and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Ningbo MedicalSystem Biotechnology is expected to under-perform the Zhangjiagang Freetrade. But the stock apears to be less risky and, when comparing its historical volatility, Ningbo MedicalSystem Biotechnology is 1.21 times less risky than Zhangjiagang Freetrade. The stock trades about -0.08 of its potential returns per unit of risk. The Zhangjiagang Freetrade Science is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Zhangjiagang Freetrade Science on October 10, 2024 and sell it today you would earn a total of  11.00  from holding Zhangjiagang Freetrade Science or generate 3.26% return on investment over 90 days.

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

Ningbo MedicalSystem Biotechno  vs.  Zhangjiagang Freetrade Science

Ningbo MedicalSystem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo MedicalSystem Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Zhangjiagang Freetrade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Freetrade Science are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhangjiagang Freetrade 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 Zhangjiagang Freetrade

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

The idea behind Ningbo MedicalSystem Biotechnology and Zhangjiagang Freetrade Science 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.