Correlation Between Ningbo Fujia and Weihai Honglin

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

Diversification Opportunities for Ningbo Fujia and Weihai Honglin

NingboWeihaiDiversified AwayNingboWeihaiDiversified Away100%
0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ningbo and Weihai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and Weihai Honglin Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Honglin Electronic 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 Weihai Honglin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Honglin Electronic has no effect on the direction of Ningbo Fujia i.e., Ningbo Fujia and Weihai Honglin go up and down completely randomly.

Pair Corralation between Ningbo Fujia and Weihai Honglin

Assuming the 90 days trading horizon Ningbo Fujia is expected to generate 1.04 times less return on investment than Weihai Honglin. In addition to that, Ningbo Fujia is 1.26 times more volatile than Weihai Honglin Electronic. It trades about 0.09 of its total potential returns per unit of risk. Weihai Honglin Electronic is currently generating about 0.12 per unit of volatility. If you would invest  1,291  in Weihai Honglin Electronic on October 20, 2024 and sell it today you would earn a total of  270.00  from holding Weihai Honglin Electronic or generate 20.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ningbo Fujia Industrial  vs.  Weihai Honglin Electronic

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -505101520
JavaScript chart by amCharts 3.21.15603219 301439
       Timeline  
Ningbo Fujia Industrial 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 6 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1212.51313.51414.51515.5
Weihai Honglin Electronic 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Weihai Honglin Electronic are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weihai Honglin sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1313.51414.51515.516

Ningbo Fujia and Weihai Honglin Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.41-8.54-5.68-2.820.04772.895.888.8711.8714.86 0.0100.0150.0200.0250.0300.0350.0400.045
JavaScript chart by amCharts 3.21.15603219 301439
       Returns  

Pair Trading with Ningbo Fujia and Weihai Honglin

The main advantage of trading using opposite Ningbo Fujia and Weihai Honglin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Fujia position performs unexpectedly, Weihai Honglin 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 Weihai Honglin will offset losses from the drop in Weihai Honglin's long position.
The idea behind Ningbo Fujia Industrial and Weihai Honglin Electronic 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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