Correlation Between Ningbo Construction and Sinomach General

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

Diversification Opportunities for Ningbo Construction and Sinomach General

0.37

Correlation Coefficient

Ningbo Construction  Sinomach General

Weak diversification

The 3 months correlation between Ningbo and Sinomach is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac 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 Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and Sinomach General go up and down completely randomly.

Pair Corralation between Ningbo Construction and Sinomach General

Assuming the 90 days trading horizon Ningbo Construction Co is expected to generate 2.73 times more return on investment than Sinomach General. However, Ningbo Construction is 2.73 times more volatile than Sinomach General Machinery. It trades about 0.1 of its potential returns per unit of risk. Sinomach General Machinery is currently generating about 0.12 per unit of risk. If you would invest  472.00  in Ningbo Construction Co on December 26, 2024 and sell it today you would earn a total of  102.00  from holding Ningbo Construction Co or generate 21.61% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Sinomach General Machinery

Ningbo Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 7 (%) 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.

Sinomach General Mac

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach General Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Construction and Sinomach General

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

The idea behind Ningbo Construction Co and Sinomach General Machinery 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .