Correlation Between Zhonghong Pulin and Ningbo Boway

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

By analyzing existing cross correlation between Zhonghong Pulin Medical and Ningbo Boway Alloy, you can compare the effects of market volatilities on Zhonghong Pulin and Ningbo Boway 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 Zhonghong Pulin with a short position of Ningbo Boway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhonghong Pulin and Ningbo Boway.

Diversification Opportunities for Zhonghong Pulin and Ningbo Boway

0.42

Correlation Coefficient

Zhonghong Pulin  Ningbo Boway

Very weak diversification

The 3 months correlation between Zhonghong and Ningbo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zhonghong Pulin Medical and Ningbo Boway Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Boway Alloy and Zhonghong Pulin 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 Zhonghong Pulin Medical are associated (or correlated) with Ningbo Boway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Boway Alloy has no effect on the direction of Zhonghong Pulin i.e., Zhonghong Pulin and Ningbo Boway go up and down completely randomly.

Pair Corralation between Zhonghong Pulin and Ningbo Boway

Assuming the 90 days trading horizon Zhonghong Pulin Medical is expected to under-perform the Ningbo Boway. But the stock apears to be less risky and, when comparing its historical volatility, Zhonghong Pulin Medical is 1.54 times less risky than Ningbo Boway. The stock trades about -0.25 of its potential returns per unit of risk. The Ningbo Boway Alloy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,783  in Ningbo Boway Alloy on October 3, 2024 and sell it today you would earn a total of  247.00  from holding Ningbo Boway Alloy or generate 13.85% return on investment over 90 days.

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

Zhonghong Pulin Medical  vs.  Ningbo Boway Alloy

Zhonghong Pulin Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhonghong Pulin Medical 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.

Ningbo Boway Alloy

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Boway Alloy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Boway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhonghong Pulin and Ningbo Boway

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

The idea behind Zhonghong Pulin Medical and Ningbo Boway Alloy 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.