Correlation Between Guotai Epoint and Ningxia Building

Can any of the company-specific risk be diversified away by investing in both Guotai Epoint and Ningxia Building 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 Guotai Epoint and Ningxia Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guotai Epoint Software and Ningxia Building Materials, you can compare the effects of market volatilities on Guotai Epoint and Ningxia Building 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 Guotai Epoint with a short position of Ningxia Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guotai Epoint and Ningxia Building.

Diversification Opportunities for Guotai Epoint and Ningxia Building

-0.23

Correlation Coefficient

Guotai Epoint  Ningxia Building

Very good diversification

The 3 months correlation between Guotai and Ningxia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Guotai Epoint Software and Ningxia Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Building Mat and Guotai Epoint 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 Guotai Epoint Software are associated (or correlated) with Ningxia Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Building Mat has no effect on the direction of Guotai Epoint i.e., Guotai Epoint and Ningxia Building go up and down completely randomly.

Pair Corralation between Guotai Epoint and Ningxia Building

Assuming the 90 days trading horizon Guotai Epoint Software is expected to under-perform the Ningxia Building. In addition to that, Guotai Epoint is 1.07 times more volatile than Ningxia Building Materials. It trades about -0.03 of its total potential returns per unit of risk. Ningxia Building Materials is currently generating about 0.02 per unit of volatility. If you would invest  1,180  in Ningxia Building Materials on October 11, 2024 and sell it today you would earn a total of  153.00  from holding Ningxia Building Materials or generate 12.97% return on investment over 90 days.

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

Guotai Epoint Software  vs.  Ningxia Building Materials

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ningxia Building Mat

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Building Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Building sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guotai Epoint and Ningxia Building

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

The idea behind Guotai Epoint Software and Ningxia Building 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.