Correlation Between Iat Automobile and Ningbo Fangzheng

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

By analyzing existing cross correlation between Iat Automobile Technology and Ningbo Fangzheng Automobile, you can compare the effects of market volatilities on Iat Automobile and Ningbo Fangzheng 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 Iat Automobile with a short position of Ningbo Fangzheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iat Automobile and Ningbo Fangzheng.

Diversification Opportunities for Iat Automobile and Ningbo Fangzheng

0.74

Correlation Coefficient

Iat Automobile  Ningbo Fangzheng

Poor diversification

The 3 months correlation between Iat and Ningbo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Iat Automobile Technology and Ningbo Fangzheng Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fangzheng Aut and Iat Automobile 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 Iat Automobile Technology are associated (or correlated) with Ningbo Fangzheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fangzheng Aut has no effect on the direction of Iat Automobile i.e., Iat Automobile and Ningbo Fangzheng go up and down completely randomly.

Pair Corralation between Iat Automobile and Ningbo Fangzheng

Assuming the 90 days trading horizon Iat Automobile Technology is expected to generate 1.02 times more return on investment than Ningbo Fangzheng. However, Iat Automobile is 1.02 times more volatile than Ningbo Fangzheng Automobile. It trades about 0.16 of its potential returns per unit of risk. Ningbo Fangzheng Automobile is currently generating about 0.12 per unit of risk. If you would invest  889.00  in Iat Automobile Technology on September 4, 2024 and sell it today you would earn a total of  382.00  from holding Iat Automobile Technology or generate 42.97% return on investment over 90 days.

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

Iat Automobile Technology  vs.  Ningbo Fangzheng Automobile

Iat Automobile Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iat Automobile Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Iat Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Fangzheng Aut

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fangzheng Automobile are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Fangzheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iat Automobile and Ningbo Fangzheng

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

The idea behind Iat Automobile Technology and Ningbo Fangzheng Automobile 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.