Correlation Between Hangzhou Gisway and Ningbo Fujia

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Can any of the company-specific risk be diversified away by investing in both Hangzhou Gisway and Ningbo Fujia 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 Hangzhou Gisway and Ningbo Fujia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hangzhou Gisway Information and Ningbo Fujia Industrial, you can compare the effects of market volatilities on Hangzhou Gisway and Ningbo Fujia 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 Hangzhou Gisway with a short position of Ningbo Fujia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Gisway and Ningbo Fujia.

Diversification Opportunities for Hangzhou Gisway and Ningbo Fujia

0.71
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Hangzhou Gisway and Ningbo Fujia

Assuming the 90 days trading horizon Hangzhou Gisway Information is expected to generate 1.64 times more return on investment than Ningbo Fujia. However, Hangzhou Gisway is 1.64 times more volatile than Ningbo Fujia Industrial. It trades about 0.13 of its potential returns per unit of risk. Ningbo Fujia Industrial is currently generating about 0.2 per unit of risk. If you would invest  3,160  in Hangzhou Gisway Information on September 28, 2024 and sell it today you would earn a total of  454.00  from holding Hangzhou Gisway Information or generate 14.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Hangzhou Gisway Information  vs.  Ningbo Fujia Industrial

 Performance 
       Timeline  
Hangzhou Gisway Info 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Gisway Information are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Gisway sustained solid returns over the last few months and may actually be approaching a breakup point.
Ningbo Fujia Industrial 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Fujia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hangzhou Gisway and Ningbo Fujia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hangzhou Gisway and Ningbo Fujia

The main advantage of trading using opposite Hangzhou Gisway and Ningbo Fujia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hangzhou Gisway position performs unexpectedly, Ningbo Fujia 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 Ningbo Fujia will offset losses from the drop in Ningbo Fujia's long position.
The idea behind Hangzhou Gisway Information and Ningbo Fujia Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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