Correlation Between CICC Fund and Ningbo Thermal

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

By analyzing existing cross correlation between CICC Fund Management and Ningbo Thermal Power, you can compare the effects of market volatilities on CICC Fund and Ningbo Thermal 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 CICC Fund with a short position of Ningbo Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CICC Fund and Ningbo Thermal.

Diversification Opportunities for CICC Fund and Ningbo Thermal

0.73

Correlation Coefficient

CICC Fund  Ningbo Thermal

Poor diversification

The 3 months correlation between CICC and Ningbo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CICC Fund Management and Ningbo Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Thermal Power and CICC Fund 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 CICC Fund Management are associated (or correlated) with Ningbo Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Thermal Power has no effect on the direction of CICC Fund i.e., CICC Fund and Ningbo Thermal go up and down completely randomly.

Pair Corralation between CICC Fund and Ningbo Thermal

Assuming the 90 days trading horizon CICC Fund Management is expected to generate 0.4 times more return on investment than Ningbo Thermal. However, CICC Fund Management is 2.51 times less risky than Ningbo Thermal. It trades about 0.08 of its potential returns per unit of risk. Ningbo Thermal Power is currently generating about 0.01 per unit of risk. If you would invest  268.00  in CICC Fund Management on October 4, 2024 and sell it today you would earn a total of  100.00  from holding CICC Fund Management or generate 37.31% return on investment over 90 days.

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

CICC Fund Management  vs.  Ningbo Thermal Power

CICC Fund Management

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Thermal Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Thermal Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Thermal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CICC Fund and Ningbo Thermal

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

The idea behind CICC Fund Management and Ningbo Thermal Power 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.