Correlation Between Ningbo Construction and China Sports

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

Diversification Opportunities for Ningbo Construction and China Sports

0.53

Correlation Coefficient

Ningbo Construction  China Sports

Very weak diversification

The 3 months correlation between Ningbo and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry 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 China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and China Sports go up and down completely randomly.

Pair Corralation between Ningbo Construction and China Sports

Assuming the 90 days trading horizon Ningbo Construction Co is expected to under-perform the China Sports. But the stock apears to be less risky and, when comparing its historical volatility, Ningbo Construction Co is 1.04 times less risky than China Sports. The stock trades about -0.18 of its potential returns per unit of risk. The China Sports Industry is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  856.00  in China Sports Industry on October 11, 2024 and sell it today you would lose (98.00) from holding China Sports Industry or give up 11.45% of portfolio value over 90 days.

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

Ningbo Construction Co  vs.  China Sports Industry

Ningbo Construction

Risk-Adjusted Performance

3 of 100

Insignificant

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.

China Sports Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Sports Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Sports 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 China Sports

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

The idea behind Ningbo Construction Co and China Sports Industry 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.