Correlation Between Zhejiang Juhua and Ningbo Boway

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

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

Diversification Opportunities for Zhejiang Juhua and Ningbo Boway

0.66

Correlation Coefficient

Zhejiang Juhua  Ningbo Boway

Poor diversification

The 3 months correlation between Zhejiang and Ningbo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Ningbo Boway Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Boway Alloy and Zhejiang Juhua 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 Zhejiang Juhua Co are associated (or correlated) with Ningbo Boway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Boway Alloy has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Ningbo Boway go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Ningbo Boway

Assuming the 90 days trading horizon Zhejiang Juhua is expected to generate 2.43 times less return on investment than Ningbo Boway. But when comparing it to its historical volatility, Zhejiang Juhua Co is 1.74 times less risky than Ningbo Boway. It trades about 0.14 of its potential returns per unit of risk. Ningbo Boway Alloy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,783  in Ningbo Boway Alloy on October 3, 2024 and sell it today you would earn a total of  247.00  from holding Ningbo Boway Alloy or generate 13.85% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Ningbo Boway Alloy

Zhejiang Juhua

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ningbo Boway Alloy

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Boway Alloy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Boway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Juhua and Ningbo Boway

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

The idea behind Zhejiang Juhua Co and Ningbo Boway Alloy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.