Correlation Between Ningbo Fangzheng and Hang Xiao

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

Diversification Opportunities for Ningbo Fangzheng and Hang Xiao

0.58

Correlation Coefficient

Ningbo Fangzheng  Hang Xiao

Very weak diversification

The 3 months correlation between Ningbo and Hang is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fangzheng Automobile and Hang Xiao Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Xiao Steel 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 Hang Xiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Xiao Steel has no effect on the direction of Ningbo Fangzheng i.e., Ningbo Fangzheng and Hang Xiao go up and down completely randomly.

Pair Corralation between Ningbo Fangzheng and Hang Xiao

Assuming the 90 days trading horizon Ningbo Fangzheng Automobile is expected to generate 1.48 times more return on investment than Hang Xiao. However, Ningbo Fangzheng is 1.48 times more volatile than Hang Xiao Steel. It trades about -0.02 of its potential returns per unit of risk. Hang Xiao Steel is currently generating about -0.03 per unit of risk. If you would invest  1,566  in Ningbo Fangzheng Automobile on October 21, 2024 and sell it today you would lose (105.00) from holding Ningbo Fangzheng Automobile or give up 6.7% of portfolio value over 90 days.

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

Ningbo Fangzheng Automobile  vs.  Hang Xiao Steel

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.

Hang Xiao Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hang Xiao Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hang Xiao 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 Hang Xiao

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

The idea behind Ningbo Fangzheng Automobile and Hang Xiao Steel 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.