Correlation Between China Petroleum and Ningbo Tech

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

By analyzing existing cross correlation between China Petroleum Chemical and Ningbo Tech Bank Co, you can compare the effects of market volatilities on China Petroleum and Ningbo Tech 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 China Petroleum with a short position of Ningbo Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and Ningbo Tech.

Diversification Opportunities for China Petroleum and Ningbo Tech

-0.54

Correlation Coefficient

China Petroleum  Ningbo Tech

Excellent diversification

The 3 months correlation between China and Ningbo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank and China Petroleum 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 China Petroleum Chemical are associated (or correlated) with Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of China Petroleum i.e., China Petroleum and Ningbo Tech go up and down completely randomly.

Pair Corralation between China Petroleum and Ningbo Tech

Assuming the 90 days trading horizon China Petroleum Chemical is expected to under-perform the Ningbo Tech. But the stock apears to be less risky and, when comparing its historical volatility, China Petroleum Chemical is 1.44 times less risky than Ningbo Tech. The stock trades about -0.06 of its potential returns per unit of risk. The Ningbo Tech Bank Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Ningbo Tech Bank Co on August 31, 2024 and sell it today you would earn a total of  79.00  from holding Ningbo Tech Bank Co or generate 33.05% return on investment over 90 days.

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

China Petroleum Chemical  vs.  Ningbo Tech Bank Co

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petroleum Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ningbo Tech Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and Ningbo Tech

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

The idea behind China Petroleum Chemical and Ningbo Tech Bank Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.