Correlation Between Ningbo Fangzheng and Yingde Greatchem

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

Diversification Opportunities for Ningbo Fangzheng and Yingde Greatchem

0.63

Correlation Coefficient

Ningbo Fangzheng  Yingde Greatchem

Poor diversification

The 3 months correlation between Ningbo and Yingde is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fangzheng Automobile and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che 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 Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Ningbo Fangzheng i.e., Ningbo Fangzheng and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Ningbo Fangzheng and Yingde Greatchem

Assuming the 90 days trading horizon Ningbo Fangzheng Automobile is expected to generate 1.0 times more return on investment than Yingde Greatchem. However, Ningbo Fangzheng is 1.0 times more volatile than Yingde Greatchem Chemicals. It trades about -0.03 of its potential returns per unit of risk. Yingde Greatchem Chemicals is currently generating about -0.03 per unit of risk. If you would invest  2,810  in Ningbo Fangzheng Automobile on October 25, 2024 and sell it today you would lose (1,354) from holding Ningbo Fangzheng Automobile or give up 48.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.04%
Values	Daily Returns

Ningbo Fangzheng Automobile  vs.  Yingde Greatchem Chemicals

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 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.

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningbo Fangzheng and Yingde Greatchem

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

The idea behind Ningbo Fangzheng Automobile and Yingde Greatchem Chemicals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.