Correlation Between Ningbo Construction and Ping An

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

Diversification Opportunities for Ningbo Construction and Ping An

-0.3

Correlation Coefficient

Ningbo Construction  Ping An

Very good diversification

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

Pair Corralation between Ningbo Construction and Ping An

Assuming the 90 days trading horizon Ningbo Construction is expected to generate 2.61 times less return on investment than Ping An. In addition to that, Ningbo Construction is 1.55 times more volatile than Ping An Insurance. It trades about 0.02 of its total potential returns per unit of risk. Ping An Insurance is currently generating about 0.07 per unit of volatility. If you would invest  3,817  in Ping An Insurance on October 9, 2024 and sell it today you would earn a total of  1,200  from holding Ping An Insurance or generate 31.44% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Ping An Insurance

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.

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.

Pair Trading with Ningbo Construction and Ping An

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

The idea behind Ningbo Construction Co and Ping An Insurance 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.