Correlation Between Cambricon Technologies and Ningbo Ligong

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

By analyzing existing cross correlation between Cambricon Technologies Corp and Ningbo Ligong Online, you can compare the effects of market volatilities on Cambricon Technologies and Ningbo Ligong 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 Cambricon Technologies with a short position of Ningbo Ligong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambricon Technologies and Ningbo Ligong.

Diversification Opportunities for Cambricon Technologies and Ningbo Ligong

-0.69

Correlation Coefficient

Cambricon Technologies  Ningbo Ligong

Excellent diversification

The 3 months correlation between Cambricon and Ningbo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Ningbo Ligong Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Ligong Online and Cambricon Technologies 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 Cambricon Technologies Corp are associated (or correlated) with Ningbo Ligong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Ligong Online has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Ningbo Ligong go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Ningbo Ligong

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 2.08 times more return on investment than Ningbo Ligong. However, Cambricon Technologies is 2.08 times more volatile than Ningbo Ligong Online. It trades about 0.13 of its potential returns per unit of risk. Ningbo Ligong Online is currently generating about -0.32 per unit of risk. If you would invest  57,012  in Cambricon Technologies Corp on October 6, 2024 and sell it today you would earn a total of  5,088  from holding Cambricon Technologies Corp or generate 8.92% return on investment over 90 days.

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

Cambricon Technologies Corp  vs.  Ningbo Ligong Online

Cambricon Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cambricon Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Ningbo Ligong Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo Ligong Online 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.

Pair Trading with Cambricon Technologies and Ningbo Ligong

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

The idea behind Cambricon Technologies Corp and Ningbo Ligong Online 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.