Correlation Between Industrial Bank and Ningbo Tech-Bank

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

By analyzing existing cross correlation between Industrial Bank Co and Ningbo Tech Bank Co, you can compare the effects of market volatilities on Industrial Bank and Ningbo Tech-Bank 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 Industrial Bank with a short position of Ningbo Tech-Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Ningbo Tech-Bank.

Diversification Opportunities for Industrial Bank and Ningbo Tech-Bank

-0.14

Correlation Coefficient

Industrial Bank  Ningbo Tech-Bank

Good diversification

The 3 months correlation between Industrial and Ningbo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank Co and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank and Industrial Bank 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 Industrial Bank Co are associated (or correlated) with Ningbo Tech-Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of Industrial Bank i.e., Industrial Bank and Ningbo Tech-Bank go up and down completely randomly.

Pair Corralation between Industrial Bank and Ningbo Tech-Bank

Assuming the 90 days trading horizon Industrial Bank is expected to generate 1.04 times less return on investment than Ningbo Tech-Bank. But when comparing it to its historical volatility, Industrial Bank Co is 1.7 times less risky than Ningbo Tech-Bank. It trades about 0.19 of its potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Ningbo Tech Bank Co on December 26, 2024 and sell it today you would earn a total of  36.00  from holding Ningbo Tech Bank Co or generate 13.09% return on investment over 90 days.

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

Industrial Bank Co  vs.  Ningbo Tech Bank Co

Industrial Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Tech Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech-Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Bank and Ningbo Tech-Bank

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

The idea behind Industrial Bank Co and Ningbo Tech Bank Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..