Correlation Between Ningbo Thermal and Tieling Newcity

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

By analyzing existing cross correlation between Ningbo Thermal Power and Tieling Newcity Investment, you can compare the effects of market volatilities on Ningbo Thermal and Tieling Newcity 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 Thermal with a short position of Tieling Newcity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Thermal and Tieling Newcity.

Diversification Opportunities for Ningbo Thermal and Tieling Newcity

0.88

Correlation Coefficient

Ningbo Thermal  Tieling Newcity

Very poor diversification

The 3 months correlation between Ningbo and Tieling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Thermal Power and Tieling Newcity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tieling Newcity Inve and Ningbo Thermal 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 Thermal Power are associated (or correlated) with Tieling Newcity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tieling Newcity Inve has no effect on the direction of Ningbo Thermal i.e., Ningbo Thermal and Tieling Newcity go up and down completely randomly.

Pair Corralation between Ningbo Thermal and Tieling Newcity

Assuming the 90 days trading horizon Ningbo Thermal Power is expected to generate 0.69 times more return on investment than Tieling Newcity. However, Ningbo Thermal Power is 1.45 times less risky than Tieling Newcity. It trades about 0.02 of its potential returns per unit of risk. Tieling Newcity Investment is currently generating about 0.0 per unit of risk. If you would invest  477.00  in Ningbo Thermal Power on September 19, 2024 and sell it today you would earn a total of  33.00  from holding Ningbo Thermal Power or generate 6.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.74%
Values	Daily Returns

Ningbo Thermal Power  vs.  Tieling Newcity Investment

Ningbo Thermal Power

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Thermal Power are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Thermal sustained solid returns over the last few months and may actually be approaching a breakup point.

Tieling Newcity Inve

Risk-Adjusted Performance

27 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ningbo Thermal and Tieling Newcity

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

The idea behind Ningbo Thermal Power and Tieling Newcity Investment 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.