Correlation Between Ningbo Tip and Orinko Advanced

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

Diversification Opportunities for Ningbo Tip and Orinko Advanced

0.81

Correlation Coefficient

Ningbo Tip  Orinko Advanced

Very poor diversification

The 3 months correlation between Ningbo and Orinko is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tip Rubber and Orinko Advanced Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinko Advanced Plastics 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 Orinko Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinko Advanced Plastics has no effect on the direction of Ningbo Tip i.e., Ningbo Tip and Orinko Advanced go up and down completely randomly.

Pair Corralation between Ningbo Tip and Orinko Advanced

Assuming the 90 days trading horizon Ningbo Tip is expected to generate 2.16 times less return on investment than Orinko Advanced. But when comparing it to its historical volatility, Ningbo Tip Rubber is 1.14 times less risky than Orinko Advanced. It trades about 0.06 of its potential returns per unit of risk. Orinko Advanced Plastics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  730.00  in Orinko Advanced Plastics on October 2, 2024 and sell it today you would earn a total of  321.00  from holding Orinko Advanced Plastics or generate 43.97% 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.  Orinko Advanced Plastics

Ningbo Tip Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Tip Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Orinko Advanced Plastics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orinko Advanced Plastics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orinko Advanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ningbo Tip and Orinko Advanced

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

The idea behind Ningbo Tip Rubber and Orinko Advanced Plastics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.