Correlation Between Ningxia Building and Suzhou Mingzhi

Can any of the company-specific risk be diversified away by investing in both Ningxia Building and Suzhou Mingzhi 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 Suzhou Mingzhi 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 Suzhou Mingzhi Technology, you can compare the effects of market volatilities on Ningxia Building and Suzhou Mingzhi 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 Suzhou Mingzhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningxia Building and Suzhou Mingzhi.

Diversification Opportunities for Ningxia Building and Suzhou Mingzhi

0.51

Correlation Coefficient

Ningxia Building  Suzhou Mingzhi

Very weak diversification

The 3 months correlation between Ningxia and Suzhou is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Building Materials and Suzhou Mingzhi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Mingzhi 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 Suzhou Mingzhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Mingzhi Technology has no effect on the direction of Ningxia Building i.e., Ningxia Building and Suzhou Mingzhi go up and down completely randomly.

Pair Corralation between Ningxia Building and Suzhou Mingzhi

Assuming the 90 days trading horizon Ningxia Building is expected to generate 15.28 times less return on investment than Suzhou Mingzhi. In addition to that, Ningxia Building is 1.37 times more volatile than Suzhou Mingzhi Technology. It trades about 0.0 of its total potential returns per unit of risk. Suzhou Mingzhi Technology is currently generating about 0.07 per unit of volatility. If you would invest  1,731  in Suzhou Mingzhi Technology on December 30, 2024 and sell it today you would earn a total of  125.00  from holding Suzhou Mingzhi Technology or generate 7.22% return on investment over 90 days.

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

Ningxia Building Materials  vs.  Suzhou Mingzhi Technology

Ningxia Building Mat

Risk-Adjusted Performance

Very Weak

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

Suzhou Mingzhi Technology

Risk-Adjusted Performance

Modest

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

Pair Trading with Ningxia Building and Suzhou Mingzhi

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

The idea behind Ningxia Building Materials and Suzhou Mingzhi 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.