Correlation Between Ningbo Fujia and Guangzhou Jointas

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

Diversification Opportunities for Ningbo Fujia and Guangzhou Jointas

0.23

Correlation Coefficient

Ningbo Fujia  Guangzhou Jointas

Modest diversification

The 3 months correlation between Ningbo and Guangzhou is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and Guangzhou Jointas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Jointas 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 Guangzhou Jointas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Jointas has no effect on the direction of Ningbo Fujia i.e., Ningbo Fujia and Guangzhou Jointas go up and down completely randomly.

Pair Corralation between Ningbo Fujia and Guangzhou Jointas

Assuming the 90 days trading horizon Ningbo Fujia Industrial is expected to generate 1.63 times more return on investment than Guangzhou Jointas. However, Ningbo Fujia is 1.63 times more volatile than Guangzhou Jointas Chemical. It trades about 0.16 of its potential returns per unit of risk. Guangzhou Jointas Chemical is currently generating about -0.05 per unit of risk. If you would invest  1,458  in Ningbo Fujia Industrial on December 11, 2024 and sell it today you would earn a total of  524.00  from holding Ningbo Fujia Industrial or generate 35.94% return on investment over 90 days.

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

Ningbo Fujia Industrial  vs.  Guangzhou Jointas Chemical

Ningbo Fujia Industrial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Fujia sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Jointas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Jointas Chemical 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 Fujia and Guangzhou Jointas

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

The idea behind Ningbo Fujia Industrial and Guangzhou Jointas Chemical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.