Correlation Between Ningbo Fujia and Chongqing Landai

Can any of the company-specific risk be diversified away by investing in both Ningbo Fujia and Chongqing Landai 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 Fujia and Chongqing Landai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningbo Fujia Industrial and Chongqing Landai Powertrain, you can compare the effects of market volatilities on Ningbo Fujia and Chongqing Landai 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 Fujia with a short position of Chongqing Landai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Fujia and Chongqing Landai.

Diversification Opportunities for Ningbo Fujia and Chongqing Landai

0.54

Correlation Coefficient

Ningbo Fujia  Chongqing Landai

Very weak diversification

The 3 months correlation between Ningbo and Chongqing is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and Chongqing Landai Powertrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Landai Pow and Ningbo Fujia 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 Fujia Industrial are associated (or correlated) with Chongqing Landai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Landai Pow has no effect on the direction of Ningbo Fujia i.e., Ningbo Fujia and Chongqing Landai go up and down completely randomly.

Pair Corralation between Ningbo Fujia and Chongqing Landai

Assuming the 90 days trading horizon Ningbo Fujia Industrial is expected to generate 0.68 times more return on investment than Chongqing Landai. However, Ningbo Fujia Industrial is 1.46 times less risky than Chongqing Landai. It trades about -0.01 of its potential returns per unit of risk. Chongqing Landai Powertrain is currently generating about -0.18 per unit of risk. If you would invest  1,455  in Ningbo Fujia Industrial on October 11, 2024 and sell it today you would lose (24.00) from holding Ningbo Fujia Industrial or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Ningbo Fujia Industrial  vs.  Chongqing Landai Powertrain

Ningbo Fujia Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Fujia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chongqing Landai Pow

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Landai Powertrain are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Landai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Fujia and Chongqing Landai

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

The idea behind Ningbo Fujia Industrial and Chongqing Landai Powertrain 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.