Correlation Between Ningbo Construction and Hunan Investment

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

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

Diversification Opportunities for Ningbo Construction and Hunan Investment

0.12

Correlation Coefficient

Ningbo Construction  Hunan Investment

Average diversification

The 3 months correlation between Ningbo and Hunan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Ningbo Construction 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 Construction Co are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and Hunan Investment go up and down completely randomly.

Pair Corralation between Ningbo Construction and Hunan Investment

Assuming the 90 days trading horizon Ningbo Construction Co is expected to generate 3.15 times more return on investment than Hunan Investment. However, Ningbo Construction is 3.15 times more volatile than Hunan Investment Group. It trades about 0.14 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.03 per unit of risk. If you would invest  457.00  in Ningbo Construction Co on December 24, 2024 and sell it today you would earn a total of  179.00  from holding Ningbo Construction Co or generate 39.17% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Hunan Investment Group

Ningbo Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan Investment 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 Construction and Hunan Investment

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

The idea behind Ningbo Construction Co and Hunan Investment Group 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.