Correlation Between Ningbo Tip and Inspur Software

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

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

Diversification Opportunities for Ningbo Tip and Inspur Software

0.5

Correlation Coefficient

Ningbo Tip  Inspur Software

Very weak diversification

The 3 months correlation between Ningbo and Inspur is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tip Rubber and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software and Ningbo Tip 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 Tip Rubber are associated (or correlated) with Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Ningbo Tip i.e., Ningbo Tip and Inspur Software go up and down completely randomly.

Pair Corralation between Ningbo Tip and Inspur Software

Assuming the 90 days trading horizon Ningbo Tip Rubber is expected to generate 0.9 times more return on investment than Inspur Software. However, Ningbo Tip Rubber is 1.11 times less risky than Inspur Software. It trades about 0.04 of its potential returns per unit of risk. Inspur Software Co is currently generating about -0.01 per unit of risk. If you would invest  1,230  in Ningbo Tip Rubber on October 22, 2024 and sell it today you would earn a total of  55.00  from holding Ningbo Tip Rubber or generate 4.47% return on investment over 90 days.

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

Ningbo Tip Rubber  vs.  Inspur Software Co

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 weak basic indicators, Ningbo Tip may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Inspur Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ningbo Tip and Inspur Software

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

The idea behind Ningbo Tip Rubber and Inspur Software Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.