Correlation Between Chengtun Mining and Ningbo Ligong

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

By analyzing existing cross correlation between Chengtun Mining Group and Ningbo Ligong Online, you can compare the effects of market volatilities on Chengtun Mining and Ningbo Ligong 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 Chengtun Mining with a short position of Ningbo Ligong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengtun Mining and Ningbo Ligong.

Diversification Opportunities for Chengtun Mining and Ningbo Ligong

-0.17

Correlation Coefficient

Chengtun Mining  Ningbo Ligong

Good diversification

The 3 months correlation between Chengtun and Ningbo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Ningbo Ligong Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Ligong Online and Chengtun Mining 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 Chengtun Mining Group are associated (or correlated) with Ningbo Ligong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Ligong Online has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and Ningbo Ligong go up and down completely randomly.

Pair Corralation between Chengtun Mining and Ningbo Ligong

Assuming the 90 days trading horizon Chengtun Mining Group is expected to under-perform the Ningbo Ligong. But the stock apears to be less risky and, when comparing its historical volatility, Chengtun Mining Group is 1.13 times less risky than Ningbo Ligong. The stock trades about -0.18 of its potential returns per unit of risk. The Ningbo Ligong Online is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,368  in Ningbo Ligong Online on September 21, 2024 and sell it today you would lose (65.00) from holding Ningbo Ligong Online or give up 4.75% of portfolio value over 90 days.

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

Chengtun Mining Group  vs.  Ningbo Ligong Online

Chengtun Mining Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Ligong Online

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chengtun Mining and Ningbo Ligong

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

The idea behind Chengtun Mining Group and Ningbo Ligong Online 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.