Correlation Between Ningbo MedicalSystem and Suzhou Mingzhi

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

Diversification Opportunities for Ningbo MedicalSystem and Suzhou Mingzhi

0.8

Correlation Coefficient

Ningbo MedicalSystem  Suzhou Mingzhi

Very poor diversification

The 3 months correlation between Ningbo and Suzhou is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo MedicalSystem Biotechno and Suzhou Mingzhi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Mingzhi Technology 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 Suzhou Mingzhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Mingzhi Technology has no effect on the direction of Ningbo MedicalSystem i.e., Ningbo MedicalSystem and Suzhou Mingzhi go up and down completely randomly.

Pair Corralation between Ningbo MedicalSystem and Suzhou Mingzhi

Assuming the 90 days trading horizon Ningbo MedicalSystem is expected to generate 1.67 times less return on investment than Suzhou Mingzhi. But when comparing it to its historical volatility, Ningbo MedicalSystem Biotechnology is 1.21 times less risky than Suzhou Mingzhi. It trades about 0.05 of its potential returns per unit of risk. Suzhou Mingzhi Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,731  in Suzhou Mingzhi Technology on December 30, 2024 and sell it today you would earn a total of  125.00  from holding Suzhou Mingzhi Technology or generate 7.22% return on investment over 90 days.

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

Ningbo MedicalSystem Biotechno  vs.  Suzhou Mingzhi Technology

Ningbo MedicalSystem

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo MedicalSystem Biotechnology are ranked lower than 3 (%) 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.

Suzhou Mingzhi Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Mingzhi Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Mingzhi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ningbo MedicalSystem and Suzhou Mingzhi

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

The idea behind Ningbo MedicalSystem Biotechnology and Suzhou Mingzhi Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.