Correlation Between Ningxia Building and Hangzhou EZVIZ

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

Diversification Opportunities for Ningxia Building and Hangzhou EZVIZ

0.48

Correlation Coefficient

Ningxia Building  Hangzhou EZVIZ

Very weak diversification

The 3 months correlation between Ningxia and Hangzhou is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ningxia Building Materials and Hangzhou EZVIZ Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou EZVIZ Network 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 Hangzhou EZVIZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou EZVIZ Network has no effect on the direction of Ningxia Building i.e., Ningxia Building and Hangzhou EZVIZ go up and down completely randomly.

Pair Corralation between Ningxia Building and Hangzhou EZVIZ

Assuming the 90 days trading horizon Ningxia Building Materials is expected to generate 1.54 times more return on investment than Hangzhou EZVIZ. However, Ningxia Building is 1.54 times more volatile than Hangzhou EZVIZ Network. It trades about -0.05 of its potential returns per unit of risk. Hangzhou EZVIZ Network is currently generating about -0.13 per unit of risk. If you would invest  1,487  in Ningxia Building Materials on September 28, 2024 and sell it today you would lose (56.00) from holding Ningxia Building Materials or give up 3.77% of portfolio value over 90 days.

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

Ningxia Building Materials  vs.  Hangzhou EZVIZ Network

Ningxia Building Mat

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou EZVIZ Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou EZVIZ Network 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.

Pair Trading with Ningxia Building and Hangzhou EZVIZ

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

The idea behind Ningxia Building Materials and Hangzhou EZVIZ Network 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.