Correlation Between Ningbo Construction and Qijing Machinery

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

Diversification Opportunities for Ningbo Construction and Qijing Machinery

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ningbo and Qijing is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and Qijing Machinery go up and down completely randomly.

Pair Corralation between Ningbo Construction and Qijing Machinery

Assuming the 90 days trading horizon Ningbo Construction Co is expected to under-perform the Qijing Machinery. In addition to that, Ningbo Construction is 1.18 times more volatile than Qijing Machinery. It trades about -0.01 of its total potential returns per unit of risk. Qijing Machinery is currently generating about 0.03 per unit of volatility. If you would invest  1,246  in Qijing Machinery on October 7, 2024 and sell it today you would earn a total of  42.00  from holding Qijing Machinery or generate 3.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ningbo Construction Co  vs.  Qijing Machinery

 Performance 
       Timeline  
Ningbo Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ningbo Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningbo Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Qijing Machinery 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ningbo Construction and Qijing Machinery Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ningbo Construction and Qijing Machinery

The main advantage of trading using opposite Ningbo Construction and Qijing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Construction position performs unexpectedly, Qijing Machinery 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 Qijing Machinery will offset losses from the drop in Qijing Machinery's long position.
The idea behind Ningbo Construction Co and Qijing 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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