Correlation Between Hangzhou Prevail and Ningbo MedicalSystem

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

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

Diversification Opportunities for Hangzhou Prevail and Ningbo MedicalSystem

0.9

Correlation Coefficient

Hangzhou Prevail  Ningbo MedicalSystem

Almost no diversification

The 3 months correlation between Hangzhou and Ningbo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Prevail Optoelectroni and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and Hangzhou Prevail 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 Hangzhou Prevail Optoelectronic are associated (or correlated) with Ningbo MedicalSystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo MedicalSystem has no effect on the direction of Hangzhou Prevail i.e., Hangzhou Prevail and Ningbo MedicalSystem go up and down completely randomly.

Pair Corralation between Hangzhou Prevail and Ningbo MedicalSystem

Assuming the 90 days trading horizon Hangzhou Prevail is expected to generate 3.56 times less return on investment than Ningbo MedicalSystem. In addition to that, Hangzhou Prevail is 1.06 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about 0.04 of its total potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.14 per unit of volatility. If you would invest  1,028  in Ningbo MedicalSystem Biotechnology on December 1, 2024 and sell it today you would earn a total of  59.00  from holding Ningbo MedicalSystem Biotechnology or generate 5.74% return on investment over 90 days.

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

Hangzhou Prevail Optoelectroni  vs.  Ningbo MedicalSystem Biotechno

Hangzhou Prevail Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hangzhou Prevail Optoelectronic 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ningbo MedicalSystem

Risk-Adjusted Performance

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.

Pair Trading with Hangzhou Prevail and Ningbo MedicalSystem

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

The idea behind Hangzhou Prevail Optoelectronic and Ningbo MedicalSystem Biotechnology 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.