Correlation Between Fujian Boss and Ningbo Ligong

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

By analyzing existing cross correlation between Fujian Boss Software and Ningbo Ligong Online, you can compare the effects of market volatilities on Fujian Boss and Ningbo Ligong 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 Fujian Boss with a short position of Ningbo Ligong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Boss and Ningbo Ligong.

Diversification Opportunities for Fujian Boss and Ningbo Ligong

0.79

Correlation Coefficient

Fujian Boss  Ningbo Ligong

Poor diversification

The 3 months correlation between Fujian and Ningbo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Boss Software and Ningbo Ligong Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Ligong Online and Fujian Boss 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 Fujian Boss Software are associated (or correlated) with Ningbo Ligong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Ligong Online has no effect on the direction of Fujian Boss i.e., Fujian Boss and Ningbo Ligong go up and down completely randomly.

Pair Corralation between Fujian Boss and Ningbo Ligong

Assuming the 90 days trading horizon Fujian Boss Software is expected to under-perform the Ningbo Ligong. In addition to that, Fujian Boss is 1.38 times more volatile than Ningbo Ligong Online. It trades about -0.1 of its total potential returns per unit of risk. Ningbo Ligong Online is currently generating about -0.08 per unit of volatility. If you would invest  1,432  in Ningbo Ligong Online on October 26, 2024 and sell it today you would lose (157.00) from holding Ningbo Ligong Online or give up 10.96% of portfolio value over 90 days.

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

Fujian Boss Software  vs.  Ningbo Ligong Online

Fujian Boss Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujian Boss Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ningbo Ligong Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Ligong Online 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.

Pair Trading with Fujian Boss and Ningbo Ligong

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

The idea behind Fujian Boss Software and Ningbo Ligong Online 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.