Correlation Between Ping An and Ningbo Construction

Can any of the company-specific risk be diversified away by investing in both Ping An and Ningbo Construction 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 Ningbo Construction 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 Ningbo Construction Co, you can compare the effects of market volatilities on Ping An and Ningbo Construction 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 Ningbo Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Ningbo Construction.

Diversification Opportunities for Ping An and Ningbo Construction

-0.3

Correlation Coefficient

Ping An  Ningbo Construction

Very good diversification

The 3 months correlation between Ping and Ningbo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Ningbo Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Construction 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 Ningbo Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Construction has no effect on the direction of Ping An i.e., Ping An and Ningbo Construction go up and down completely randomly.

Pair Corralation between Ping An and Ningbo Construction

Assuming the 90 days trading horizon Ping An Insurance is expected to generate 0.73 times more return on investment than Ningbo Construction. However, Ping An Insurance is 1.37 times less risky than Ningbo Construction. It trades about 0.09 of its potential returns per unit of risk. Ningbo Construction Co is currently generating about 0.02 per unit of risk. If you would invest  3,778  in Ping An Insurance on October 9, 2024 and sell it today you would earn a total of  1,239  from holding Ping An Insurance or generate 32.8% return on investment over 90 days.

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

Ping An Insurance  vs.  Ningbo Construction Co

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 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.

Ningbo Construction

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ping An and Ningbo Construction

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

The idea behind Ping An Insurance and Ningbo Construction 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.