Correlation Between Ningbo Tip and Shanghai Lingyun

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

Diversification Opportunities for Ningbo Tip and Shanghai Lingyun

-0.21

Correlation Coefficient

Ningbo Tip  Shanghai Lingyun

Very good diversification

The 3 months correlation between Ningbo and Shanghai is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tip Rubber and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind 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 Shanghai Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of Ningbo Tip i.e., Ningbo Tip and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between Ningbo Tip and Shanghai Lingyun

Assuming the 90 days trading horizon Ningbo Tip Rubber is expected to generate 1.19 times more return on investment than Shanghai Lingyun. However, Ningbo Tip is 1.19 times more volatile than Shanghai Lingyun Industries. It trades about 0.1 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about 0.0 per unit of risk. If you would invest  1,244  in Ningbo Tip Rubber on December 25, 2024 and sell it today you would earn a total of  232.00  from holding Ningbo Tip Rubber or generate 18.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Ningbo Tip Rubber  vs.  Shanghai Lingyun Industries

Ningbo Tip Rubber

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tip Rubber are ranked lower than 7 (%) 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.

Shanghai Lingyun Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Lingyun Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Lingyun 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 Shanghai Lingyun

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

The idea behind Ningbo Tip Rubber and Shanghai Lingyun Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.