Correlation Between Ningbo Fangzheng and Shenzhen Kaifa

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

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

Diversification Opportunities for Ningbo Fangzheng and Shenzhen Kaifa

0.0

Correlation Coefficient

Ningbo Fangzheng  Shenzhen Kaifa

Pay attention - limited upside

The 3 months correlation between Ningbo and Shenzhen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fangzheng Automobile and Shenzhen Kaifa Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kaifa Technology and Ningbo Fangzheng 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 Fangzheng Automobile are associated (or correlated) with Shenzhen Kaifa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kaifa Technology has no effect on the direction of Ningbo Fangzheng i.e., Ningbo Fangzheng and Shenzhen Kaifa go up and down completely randomly.

Pair Corralation between Ningbo Fangzheng and Shenzhen Kaifa

Assuming the 90 days trading horizon Ningbo Fangzheng is expected to generate 64.65 times less return on investment than Shenzhen Kaifa. But when comparing it to its historical volatility, Ningbo Fangzheng Automobile is 1.25 times less risky than Shenzhen Kaifa. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Kaifa Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,683  in Shenzhen Kaifa Technology on October 10, 2024 and sell it today you would earn a total of  79.00  from holding Shenzhen Kaifa Technology or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ningbo Fangzheng Automobile  vs.  Shenzhen Kaifa Technology

Ningbo Fangzheng Aut

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Kaifa Technology

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kaifa Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kaifa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ningbo Fangzheng and Shenzhen Kaifa

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

The idea behind Ningbo Fangzheng Automobile and Shenzhen Kaifa Technology 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.