Correlation Between Ningbo Tech and Industrial

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

By analyzing existing cross correlation between Ningbo Tech Bank Co and Industrial and Commercial, you can compare the effects of market volatilities on Ningbo Tech and Industrial 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 Tech with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Tech and Industrial.

Diversification Opportunities for Ningbo Tech and Industrial

0.37

Correlation Coefficient

Ningbo Tech  Industrial

Weak diversification

The 3 months correlation between Ningbo and Industrial is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Ningbo Tech 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 Tech Bank Co are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Industrial go up and down completely randomly.

Pair Corralation between Ningbo Tech and Industrial

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Industrial. In addition to that, Ningbo Tech is 1.61 times more volatile than Industrial and Commercial. It trades about -0.3 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.45 per unit of volatility. If you would invest  607.00  in Industrial and Commercial on September 25, 2024 and sell it today you would earn a total of  71.00  from holding Industrial and Commercial or generate 11.7% return on investment over 90 days.

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

Ningbo Tech Bank Co  vs.  Industrial and Commercial

Ningbo Tech Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Tech and Industrial

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

The idea behind Ningbo Tech Bank Co and Industrial and Commercial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.