Correlation Between Shanghai Lingyun and Ningbo MedicalSystem

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

By analyzing existing cross correlation between Shanghai Lingyun Industries and Ningbo MedicalSystem Biotechnology, you can compare the effects of market volatilities on Shanghai Lingyun and Ningbo MedicalSystem 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 Shanghai Lingyun with a short position of Ningbo MedicalSystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Lingyun and Ningbo MedicalSystem.

Diversification Opportunities for Shanghai Lingyun and Ningbo MedicalSystem

0.68

Correlation Coefficient

Shanghai Lingyun  Ningbo MedicalSystem

Poor diversification

The 3 months correlation between Shanghai and Ningbo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Lingyun Industries and Ningbo MedicalSystem Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo MedicalSystem and Shanghai Lingyun 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 Shanghai Lingyun Industries are associated (or correlated) with Ningbo MedicalSystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo MedicalSystem has no effect on the direction of Shanghai Lingyun i.e., Shanghai Lingyun and Ningbo MedicalSystem go up and down completely randomly.

Pair Corralation between Shanghai Lingyun and Ningbo MedicalSystem

Assuming the 90 days trading horizon Shanghai Lingyun Industries is expected to generate 1.52 times more return on investment than Ningbo MedicalSystem. However, Shanghai Lingyun is 1.52 times more volatile than Ningbo MedicalSystem Biotechnology. It trades about 0.14 of its potential returns per unit of risk. Ningbo MedicalSystem Biotechnology is currently generating about 0.04 per unit of risk. If you would invest  17.00  in Shanghai Lingyun Industries on October 10, 2024 and sell it today you would earn a total of  14.00  from holding Shanghai Lingyun Industries or generate 82.35% return on investment over 90 days.

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

Shanghai Lingyun Industries  vs.  Ningbo MedicalSystem Biotechno

Shanghai Lingyun Ind

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ningbo MedicalSystem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ningbo MedicalSystem Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shanghai Lingyun and Ningbo MedicalSystem

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

The idea behind Shanghai Lingyun Industries and Ningbo MedicalSystem Biotechnology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.