Correlation Between Ningbo Tip and Sinosteel Luonai

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

Diversification Opportunities for Ningbo Tip and Sinosteel Luonai

0.28

Correlation Coefficient

Ningbo Tip  Sinosteel Luonai

Modest diversification

The 3 months correlation between Ningbo and Sinosteel is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tip Rubber and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat 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 Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Ningbo Tip i.e., Ningbo Tip and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Ningbo Tip and Sinosteel Luonai

Assuming the 90 days trading horizon Ningbo Tip Rubber is expected to generate 2.8 times more return on investment than Sinosteel Luonai. However, Ningbo Tip is 2.8 times more volatile than Sinosteel Luonai Materials. It trades about 0.04 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.17 per unit of risk. If you would invest  1,388  in Ningbo Tip Rubber on December 3, 2024 and sell it today you would earn a total of  74.00  from holding Ningbo Tip Rubber or generate 5.33% return on investment over 90 days.

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

Ningbo Tip Rubber  vs.  Sinosteel Luonai Materials

Ningbo Tip Rubber

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tip Rubber are ranked lower than 3 (%) 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 April 2025.

Sinosteel Luonai Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Luonai Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ningbo Tip and Sinosteel Luonai

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

The idea behind Ningbo Tip Rubber and Sinosteel Luonai 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.