Correlation Between Ningxia Xiaoming and China Great

Can any of the company-specific risk be diversified away by investing in both Ningxia Xiaoming and China Great 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 Ningxia Xiaoming and China Great into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningxia Xiaoming Agriculture and China Great Wall, you can compare the effects of market volatilities on Ningxia Xiaoming and China Great 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 Ningxia Xiaoming with a short position of China Great. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Xiaoming and China Great.

Diversification Opportunities for Ningxia Xiaoming and China Great

0.84

Correlation Coefficient

Ningxia Xiaoming  China Great

Very poor diversification

The 3 months correlation between Ningxia and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Xiaoming Agriculture and China Great Wall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Great Wall and Ningxia Xiaoming 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 Ningxia Xiaoming Agriculture are associated (or correlated) with China Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Great Wall has no effect on the direction of Ningxia Xiaoming i.e., Ningxia Xiaoming and China Great go up and down completely randomly.

Pair Corralation between Ningxia Xiaoming and China Great

Assuming the 90 days trading horizon Ningxia Xiaoming Agriculture is expected to under-perform the China Great. In addition to that, Ningxia Xiaoming is 1.61 times more volatile than China Great Wall. It trades about -0.04 of its total potential returns per unit of risk. China Great Wall is currently generating about -0.05 per unit of volatility. If you would invest  827.00  in China Great Wall on October 21, 2024 and sell it today you would lose (51.00) from holding China Great Wall or give up 6.17% of portfolio value over 90 days.

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

Ningxia Xiaoming Agriculture  vs.  China Great Wall

Ningxia Xiaoming Agr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningxia Xiaoming Agriculture 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.

China Great Wall

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Great Wall has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Great is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ningxia Xiaoming and China Great

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

The idea behind Ningxia Xiaoming Agriculture and China Great Wall 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.