Correlation Between Ningbo Tip and CITIC Metal

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

Diversification Opportunities for Ningbo Tip and CITIC Metal

0.82

Correlation Coefficient

Ningbo Tip  CITIC Metal

Very poor diversification

The 3 months correlation between Ningbo and CITIC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tip Rubber and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal 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 CITIC Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Metal has no effect on the direction of Ningbo Tip i.e., Ningbo Tip and CITIC Metal go up and down completely randomly.

Pair Corralation between Ningbo Tip and CITIC Metal

Assuming the 90 days trading horizon Ningbo Tip Rubber is expected to generate 1.31 times more return on investment than CITIC Metal. However, Ningbo Tip is 1.31 times more volatile than CITIC Metal Co. It trades about 0.22 of its potential returns per unit of risk. CITIC Metal Co is currently generating about 0.11 per unit of risk. If you would invest  1,005  in Ningbo Tip Rubber on September 15, 2024 and sell it today you would earn a total of  431.00  from holding Ningbo Tip Rubber or generate 42.89% return on investment over 90 days.

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

Ningbo Tip Rubber  vs.  CITIC Metal Co

Ningbo Tip Rubber

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tip Rubber are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tip sustained solid returns over the last few months and may actually be approaching a breakup point.

CITIC Metal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Metal Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Tip and CITIC Metal

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

The idea behind Ningbo Tip Rubber and CITIC Metal 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.