Correlation Between Great Sun and Ningbo Tip

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

By analyzing existing cross correlation between Great Sun Foods Co and Ningbo Tip Rubber, you can compare the effects of market volatilities on Great Sun and Ningbo Tip 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 Great Sun with a short position of Ningbo Tip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Sun and Ningbo Tip.

Diversification Opportunities for Great Sun and Ningbo Tip

0.64

Correlation Coefficient

Great Sun  Ningbo Tip

Poor diversification

The 3 months correlation between Great and Ningbo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Great Sun Foods Co and Ningbo Tip Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tip Rubber and Great Sun 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 Great Sun Foods Co are associated (or correlated) with Ningbo Tip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tip Rubber has no effect on the direction of Great Sun i.e., Great Sun and Ningbo Tip go up and down completely randomly.

Pair Corralation between Great Sun and Ningbo Tip

Assuming the 90 days trading horizon Great Sun Foods Co is expected to under-perform the Ningbo Tip. In addition to that, Great Sun is 1.3 times more volatile than Ningbo Tip Rubber. It trades about 0.0 of its total potential returns per unit of risk. Ningbo Tip Rubber is currently generating about 0.03 per unit of volatility. If you would invest  1,258  in Ningbo Tip Rubber on October 25, 2024 and sell it today you would earn a total of  32.00  from holding Ningbo Tip Rubber or generate 2.54% return on investment over 90 days.

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

Great Sun Foods Co  vs.  Ningbo Tip Rubber

Great Sun Foods

Risk-Adjusted Performance

0 of 100

Weak

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

Ningbo Tip Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tip Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Tip is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Sun and Ningbo Tip

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

The idea behind Great Sun Foods Co and Ningbo Tip Rubber 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.