Correlation Between Ningbo Construction and Soyea Technology

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

Diversification Opportunities for Ningbo Construction and Soyea Technology

0.75

Correlation Coefficient

Ningbo Construction  Soyea Technology

Poor diversification

The 3 months correlation between Ningbo and Soyea is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Soyea Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soyea Technology 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 Soyea Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soyea Technology has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and Soyea Technology go up and down completely randomly.

Pair Corralation between Ningbo Construction and Soyea Technology

Assuming the 90 days trading horizon Ningbo Construction Co is expected to generate 0.94 times more return on investment than Soyea Technology. However, Ningbo Construction Co is 1.07 times less risky than Soyea Technology. It trades about 0.02 of its potential returns per unit of risk. Soyea Technology Co is currently generating about -0.01 per unit of risk. If you would invest  411.00  in Ningbo Construction Co on October 9, 2024 and sell it today you would earn a total of  8.00  from holding Ningbo Construction Co or generate 1.95% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Soyea Technology Co

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.

Soyea Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Soyea Technology Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Soyea Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Construction and Soyea Technology

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

The idea behind Ningbo Construction Co and Soyea Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.