Correlation Between Ningbo MedicalSystem and Focus Media

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

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

Diversification Opportunities for Ningbo MedicalSystem and Focus Media

0.81

Correlation Coefficient

Ningbo MedicalSystem  Focus Media

Very poor diversification

The 3 months correlation between Ningbo and Focus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo MedicalSystem Biotechno and Focus Media Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Media Information and Ningbo MedicalSystem 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 MedicalSystem Biotechnology are associated (or correlated) with Focus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Media Information has no effect on the direction of Ningbo MedicalSystem i.e., Ningbo MedicalSystem and Focus Media go up and down completely randomly.

Pair Corralation between Ningbo MedicalSystem and Focus Media

Assuming the 90 days trading horizon Ningbo MedicalSystem Biotechnology is expected to under-perform the Focus Media. In addition to that, Ningbo MedicalSystem is 1.6 times more volatile than Focus Media Information. It trades about -0.01 of its total potential returns per unit of risk. Focus Media Information is currently generating about 0.01 per unit of volatility. If you would invest  707.00  in Focus Media Information on September 28, 2024 and sell it today you would lose (1.00) from holding Focus Media Information or give up 0.14% of portfolio value over 90 days.

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

Ningbo MedicalSystem Biotechno  vs.  Focus Media Information

Ningbo MedicalSystem

Risk-Adjusted Performance

0 of 100

Insignificant

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

Focus Media Information

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Ningbo MedicalSystem and Focus Media

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

The idea behind Ningbo MedicalSystem Biotechnology and Focus Media Information 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.