Correlation Between Ningbo Bohui and Shuhua Sports

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

Diversification Opportunities for Ningbo Bohui and Shuhua Sports

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ningbo and Shuhua is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Bohui Chemical and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports 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 Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Ningbo Bohui i.e., Ningbo Bohui and Shuhua Sports go up and down completely randomly.

Pair Corralation between Ningbo Bohui and Shuhua Sports

Assuming the 90 days trading horizon Ningbo Bohui Chemical is expected to under-perform the Shuhua Sports. But the stock apears to be less risky and, when comparing its historical volatility, Ningbo Bohui Chemical is 1.22 times less risky than Shuhua Sports. The stock trades about -0.04 of its potential returns per unit of risk. The Shuhua Sports Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  858.00  in Shuhua Sports Co on October 20, 2024 and sell it today you would lose (20.00) from holding Shuhua Sports Co or give up 2.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ningbo Bohui Chemical  vs.  Shuhua Sports Co

 Performance 
       Timeline  
Ningbo Bohui Chemical 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bohui Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Bohui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Shuhua Sports 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Bohui and Shuhua Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ningbo Bohui and Shuhua Sports

The main advantage of trading using opposite Ningbo Bohui and Shuhua Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Bohui position performs unexpectedly, Shuhua Sports 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 Shuhua Sports will offset losses from the drop in Shuhua Sports' long position.
The idea behind Ningbo Bohui Chemical and Shuhua Sports Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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