Correlation Between Ningbo Thermal and China Nonferrous

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

By analyzing existing cross correlation between Ningbo Thermal Power and China Nonferrous Metal, you can compare the effects of market volatilities on Ningbo Thermal and China Nonferrous 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 Ningbo Thermal with a short position of China Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Thermal and China Nonferrous.

Diversification Opportunities for Ningbo Thermal and China Nonferrous

0.39

Correlation Coefficient

Ningbo Thermal  China Nonferrous

Weak diversification

The 3 months correlation between Ningbo and China is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Thermal Power and China Nonferrous Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Nonferrous Metal and Ningbo Thermal 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 Ningbo Thermal Power are associated (or correlated) with China Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Nonferrous Metal has no effect on the direction of Ningbo Thermal i.e., Ningbo Thermal and China Nonferrous go up and down completely randomly.

Pair Corralation between Ningbo Thermal and China Nonferrous

Assuming the 90 days trading horizon Ningbo Thermal Power is expected to generate 1.44 times more return on investment than China Nonferrous. However, Ningbo Thermal is 1.44 times more volatile than China Nonferrous Metal. It trades about 0.06 of its potential returns per unit of risk. China Nonferrous Metal is currently generating about 0.0 per unit of risk. If you would invest  391.00  in Ningbo Thermal Power on September 30, 2024 and sell it today you would earn a total of  39.00  from holding Ningbo Thermal Power or generate 9.97% return on investment over 90 days.

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

Ningbo Thermal Power  vs.  China Nonferrous Metal

Ningbo Thermal Power

Risk-Adjusted Performance

4 of 100

Insignificant

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

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningbo Thermal and China Nonferrous

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

The idea behind Ningbo Thermal Power and China Nonferrous Metal 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 Stocks Directory module to find actively traded stocks across global markets.