Correlation Between Ping An and Inner Mongolia

Can any of the company-specific risk be diversified away by investing in both Ping An and Inner Mongolia 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 Ping An and Inner Mongolia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ping An Insurance and Inner Mongolia BaoTou, you can compare the effects of market volatilities on Ping An and Inner Mongolia 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 Ping An with a short position of Inner Mongolia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Inner Mongolia.

Diversification Opportunities for Ping An and Inner Mongolia

-0.17

Correlation Coefficient

Ping An  Inner Mongolia

Good diversification

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

Pair Corralation between Ping An and Inner Mongolia

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.87 times more return on investment than Inner Mongolia. However, Ping An Insurance is 1.16 times less risky than Inner Mongolia. It trades about -0.29 of its potential returns per unit of risk. Inner Mongolia BaoTou is currently generating about -0.39 per unit of risk. If you would invest  5,483  in Ping An Insurance on October 8, 2024 and sell it today you would lose (453.00) from holding Ping An Insurance or give up 8.26% of portfolio value over 90 days.

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

Ping An Insurance  vs.  Inner Mongolia BaoTou

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Inner Mongolia BaoTou

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ping An and Inner Mongolia

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

The idea behind Ping An Insurance and Inner Mongolia BaoTou 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.