Correlation Between Jiangxi Lianchuang and Ningbo Bird

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

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

Diversification Opportunities for Jiangxi Lianchuang and Ningbo Bird

0.92

Correlation Coefficient

Jiangxi Lianchuang  Ningbo Bird

Almost no diversification

The 3 months correlation between Jiangxi and Ningbo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Lianchuang Opto electr and Ningbo Bird Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bird and Jiangxi Lianchuang 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 Jiangxi Lianchuang Opto electronic are associated (or correlated) with Ningbo Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bird has no effect on the direction of Jiangxi Lianchuang i.e., Jiangxi Lianchuang and Ningbo Bird go up and down completely randomly.

Pair Corralation between Jiangxi Lianchuang and Ningbo Bird

Assuming the 90 days trading horizon Jiangxi Lianchuang Opto electronic is expected to generate 0.96 times more return on investment than Ningbo Bird. However, Jiangxi Lianchuang Opto electronic is 1.04 times less risky than Ningbo Bird. It trades about 0.06 of its potential returns per unit of risk. Ningbo Bird Co is currently generating about 0.02 per unit of risk. If you would invest  2,490  in Jiangxi Lianchuang Opto electronic on September 28, 2024 and sell it today you would earn a total of  2,510  from holding Jiangxi Lianchuang Opto electronic or generate 100.8% return on investment over 90 days.

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

Jiangxi Lianchuang Opto electr  vs.  Ningbo Bird Co

Jiangxi Lianchuang Opto

Risk-Adjusted Performance

16 of 100

Good

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

Ningbo Bird

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bird Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Bird sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiangxi Lianchuang and Ningbo Bird

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

The idea behind Jiangxi Lianchuang Opto electronic and Ningbo Bird Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.