Correlation Between Ningbo Fangzheng and Circuit Fabology

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

Diversification Opportunities for Ningbo Fangzheng and Circuit Fabology

0.71

Correlation Coefficient

Ningbo Fangzheng  Circuit Fabology

Poor diversification

The 3 months correlation between Ningbo and Circuit is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fangzheng Automobile and Circuit Fabology Microelectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Circuit Fabology Mic 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 Circuit Fabology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Circuit Fabology Mic has no effect on the direction of Ningbo Fangzheng i.e., Ningbo Fangzheng and Circuit Fabology go up and down completely randomly.

Pair Corralation between Ningbo Fangzheng and Circuit Fabology

Assuming the 90 days trading horizon Ningbo Fangzheng Automobile is expected to generate 0.86 times more return on investment than Circuit Fabology. However, Ningbo Fangzheng Automobile is 1.17 times less risky than Circuit Fabology. It trades about 0.15 of its potential returns per unit of risk. Circuit Fabology Microelectronics is currently generating about 0.06 per unit of risk. If you would invest  1,507  in Ningbo Fangzheng Automobile on December 25, 2024 and sell it today you would earn a total of  311.00  from holding Ningbo Fangzheng Automobile or generate 20.64% return on investment over 90 days.

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

Ningbo Fangzheng Automobile  vs.  Circuit Fabology Microelectron

Ningbo Fangzheng Aut

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fangzheng Automobile are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Fangzheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Circuit Fabology Mic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Circuit Fabology Microelectronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Circuit Fabology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ningbo Fangzheng and Circuit Fabology

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

The idea behind Ningbo Fangzheng Automobile and Circuit Fabology Microelectronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.