Correlation Between Ningbo Homelink and Sinotrans

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

By analyzing existing cross correlation between Ningbo Homelink Eco iTech and Sinotrans Ltd Class, you can compare the effects of market volatilities on Ningbo Homelink and Sinotrans 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 Homelink with a short position of Sinotrans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Homelink and Sinotrans.

Diversification Opportunities for Ningbo Homelink and Sinotrans

0.45

Correlation Coefficient

Ningbo Homelink  Sinotrans

Very weak diversification

The 3 months correlation between Ningbo and Sinotrans is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Homelink Eco iTech and Sinotrans Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Class and Ningbo Homelink 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 Homelink Eco iTech are associated (or correlated) with Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Class has no effect on the direction of Ningbo Homelink i.e., Ningbo Homelink and Sinotrans go up and down completely randomly.

Pair Corralation between Ningbo Homelink and Sinotrans

Assuming the 90 days trading horizon Ningbo Homelink Eco iTech is expected to generate 3.11 times more return on investment than Sinotrans. However, Ningbo Homelink is 3.11 times more volatile than Sinotrans Ltd Class. It trades about 0.0 of its potential returns per unit of risk. Sinotrans Ltd Class is currently generating about -0.13 per unit of risk. If you would invest  1,594  in Ningbo Homelink Eco iTech on October 26, 2024 and sell it today you would lose (15.00) from holding Ningbo Homelink Eco iTech or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Ningbo Homelink Eco iTech  vs.  Sinotrans Ltd Class

Ningbo Homelink Eco

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinotrans Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinotrans Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinotrans 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 Homelink and Sinotrans

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

The idea behind Ningbo Homelink Eco iTech and Sinotrans Ltd Class 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.