Correlation Between Ningbo Bohui and Zhongtong Guomai

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

By analyzing existing cross correlation between Ningbo Bohui Chemical and Zhongtong Guomai Communication, you can compare the effects of market volatilities on Ningbo Bohui and Zhongtong Guomai 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 Bohui with a short position of Zhongtong Guomai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Bohui and Zhongtong Guomai.

Diversification Opportunities for Ningbo Bohui and Zhongtong Guomai

0.54

Correlation Coefficient

Ningbo Bohui  Zhongtong Guomai

Very weak diversification

The 3 months correlation between Ningbo and Zhongtong is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Bohui Chemical and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com and Ningbo Bohui 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 Bohui Chemical are associated (or correlated) with Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Ningbo Bohui i.e., Ningbo Bohui and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Ningbo Bohui and Zhongtong Guomai

Assuming the 90 days trading horizon Ningbo Bohui Chemical is expected to under-perform the Zhongtong Guomai. In addition to that, Ningbo Bohui is 1.01 times more volatile than Zhongtong Guomai Communication. It trades about -0.02 of its total potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about 0.0 per unit of volatility. If you would invest  1,130  in Zhongtong Guomai Communication on October 3, 2024 and sell it today you would lose (222.00) from holding Zhongtong Guomai Communication or give up 19.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Ningbo Bohui Chemical  vs.  Zhongtong Guomai Communication

Ningbo Bohui Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Bohui Chemical 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.

Zhongtong Guomai Com

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Bohui and Zhongtong Guomai

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

The idea behind Ningbo Bohui Chemical and Zhongtong Guomai Communication 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.