Correlation Between Ningxia Building and Tianjin Ruixin

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

By analyzing existing cross correlation between Ningxia Building Materials and Tianjin Ruixin Technology, you can compare the effects of market volatilities on Ningxia Building and Tianjin Ruixin 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 Ningxia Building with a short position of Tianjin Ruixin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Building and Tianjin Ruixin.

Diversification Opportunities for Ningxia Building and Tianjin Ruixin

0.6

Correlation Coefficient

Ningxia Building  Tianjin Ruixin

Poor diversification

The 3 months correlation between Ningxia and Tianjin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Building Materials and Tianjin Ruixin Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Ruixin Technology and Ningxia Building 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 Ningxia Building Materials are associated (or correlated) with Tianjin Ruixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Ruixin Technology has no effect on the direction of Ningxia Building i.e., Ningxia Building and Tianjin Ruixin go up and down completely randomly.

Pair Corralation between Ningxia Building and Tianjin Ruixin

Assuming the 90 days trading horizon Ningxia Building Materials is expected to generate 0.75 times more return on investment than Tianjin Ruixin. However, Ningxia Building Materials is 1.33 times less risky than Tianjin Ruixin. It trades about 0.03 of its potential returns per unit of risk. Tianjin Ruixin Technology is currently generating about 0.01 per unit of risk. If you would invest  1,337  in Ningxia Building Materials on October 6, 2024 and sell it today you would earn a total of  53.00  from holding Ningxia Building Materials or generate 3.96% return on investment over 90 days.

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

Ningxia Building Materials  vs.  Tianjin Ruixin Technology

Ningxia Building Mat

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tianjin Ruixin Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningxia Building and Tianjin Ruixin

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

The idea behind Ningxia Building Materials and Tianjin Ruixin Technology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.