Correlation Between Suzhou Weizhixiang and Ningbo MedicalSystem

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

By analyzing existing cross correlation between Suzhou Weizhixiang Food and Ningbo MedicalSystem Biotechnology, you can compare the effects of market volatilities on Suzhou Weizhixiang and Ningbo MedicalSystem 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 Suzhou Weizhixiang with a short position of Ningbo MedicalSystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suzhou Weizhixiang and Ningbo MedicalSystem.

Diversification Opportunities for Suzhou Weizhixiang and Ningbo MedicalSystem

0.32

Correlation Coefficient

Suzhou Weizhixiang  Ningbo MedicalSystem

Weak diversification

The 3 months correlation between Suzhou and Ningbo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Weizhixiang Food and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and Suzhou Weizhixiang 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 Suzhou Weizhixiang Food are associated (or correlated) with Ningbo MedicalSystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo MedicalSystem has no effect on the direction of Suzhou Weizhixiang i.e., Suzhou Weizhixiang and Ningbo MedicalSystem go up and down completely randomly.

Pair Corralation between Suzhou Weizhixiang and Ningbo MedicalSystem

Assuming the 90 days trading horizon Suzhou Weizhixiang Food is expected to under-perform the Ningbo MedicalSystem. In addition to that, Suzhou Weizhixiang is 1.13 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about -0.03 of its total potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.0 per unit of volatility. If you would invest  1,114  in Ningbo MedicalSystem Biotechnology on October 22, 2024 and sell it today you would lose (105.00) from holding Ningbo MedicalSystem Biotechnology or give up 9.43% of portfolio value over 90 days.

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

Suzhou Weizhixiang Food  vs.  Ningbo MedicalSystem Biotechno

Suzhou Weizhixiang Food

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo MedicalSystem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo MedicalSystem Biotechnology 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 Suzhou Weizhixiang and Ningbo MedicalSystem

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

The idea behind Suzhou Weizhixiang Food and Ningbo MedicalSystem Biotechnology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.