Correlation Between Double Medical and Ningbo Ligong

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

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

Diversification Opportunities for Double Medical and Ningbo Ligong

0.36

Correlation Coefficient

Double Medical  Ningbo Ligong

Weak diversification

The 3 months correlation between Double and Ningbo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Double Medical Technology 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 Double Medical 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 Double Medical Technology 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 Double Medical i.e., Double Medical and Ningbo Ligong go up and down completely randomly.

Pair Corralation between Double Medical and Ningbo Ligong

Assuming the 90 days trading horizon Double Medical Technology is expected to under-perform the Ningbo Ligong. But the stock apears to be less risky and, when comparing its historical volatility, Double Medical Technology is 1.14 times less risky than Ningbo Ligong. The stock trades about -0.1 of its potential returns per unit of risk. The Ningbo Ligong Online is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,314  in Ningbo Ligong Online on September 29, 2024 and sell it today you would lose (14.00) from holding Ningbo Ligong Online or give up 1.07% of portfolio value over 90 days.

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

Double Medical Technology  vs.  Ningbo Ligong Online

Double Medical Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Double Medical and Ningbo Ligong

The main advantage of trading using opposite Double Medical and Ningbo Ligong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Double Medical 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 Double Medical Technology 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.