Correlation Between Ningbo Fujia and Ningxia Building

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

Diversification Opportunities for Ningbo Fujia and Ningxia Building

-0.09

Correlation Coefficient

Ningbo Fujia  Ningxia Building

Good diversification

The 3 months correlation between Ningbo and Ningxia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat 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 Ningxia Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Ningbo Fujia i.e., Ningbo Fujia and Ningxia Building go up and down completely randomly.

Pair Corralation between Ningbo Fujia and Ningxia Building

Assuming the 90 days trading horizon Ningbo Fujia Industrial is expected to generate 0.99 times more return on investment than Ningxia Building. However, Ningbo Fujia Industrial is 1.01 times less risky than Ningxia Building. It trades about 0.03 of its potential returns per unit of risk. Ningxia Building Materials is currently generating about 0.02 per unit of risk. If you would invest  1,215  in Ningbo Fujia Industrial on October 26, 2024 and sell it today you would earn a total of  291.00  from holding Ningbo Fujia Industrial or generate 23.95% return on investment over 90 days.

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

Ningbo Fujia Industrial  vs.  Ningxia Building Materials

Ningbo Fujia Industrial

Risk-Adjusted Performance

6 of 100

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.

Ningxia Building Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningxia Building Materials 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 Ningxia Building

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

The idea behind Ningbo Fujia Industrial and Ningxia Building Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.