Correlation Between Beijing Roborock and Ningbo Fangzheng

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

By analyzing existing cross correlation between Beijing Roborock Technology and Ningbo Fangzheng Automobile, you can compare the effects of market volatilities on Beijing Roborock and Ningbo Fangzheng 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 Beijing Roborock with a short position of Ningbo Fangzheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Roborock and Ningbo Fangzheng.

Diversification Opportunities for Beijing Roborock and Ningbo Fangzheng

0.02

Correlation Coefficient

Beijing Roborock  Ningbo Fangzheng

Significant diversification

The 3 months correlation between Beijing and Ningbo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Roborock Technology and Ningbo Fangzheng Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Fangzheng Aut and Beijing Roborock 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 Beijing Roborock Technology are associated (or correlated) with Ningbo Fangzheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Fangzheng Aut has no effect on the direction of Beijing Roborock i.e., Beijing Roborock and Ningbo Fangzheng go up and down completely randomly.

Pair Corralation between Beijing Roborock and Ningbo Fangzheng

Assuming the 90 days trading horizon Beijing Roborock Technology is expected to generate 0.93 times more return on investment than Ningbo Fangzheng. However, Beijing Roborock Technology is 1.08 times less risky than Ningbo Fangzheng. It trades about 0.06 of its potential returns per unit of risk. Ningbo Fangzheng Automobile is currently generating about 0.0 per unit of risk. If you would invest  21,780  in Beijing Roborock Technology on December 4, 2024 and sell it today you would earn a total of  1,696  from holding Beijing Roborock Technology or generate 7.79% return on investment over 90 days.

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

Beijing Roborock Technology  vs.  Ningbo Fangzheng Automobile

Beijing Roborock Tec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Roborock Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Roborock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ningbo Fangzheng Aut

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Beijing Roborock and Ningbo Fangzheng

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

The idea behind Beijing Roborock Technology and Ningbo Fangzheng Automobile 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..