Correlation Between Ping An and Ningxia Xiaoming

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

By analyzing existing cross correlation between Ping An Insurance and Ningxia Xiaoming Agriculture, you can compare the effects of market volatilities on Ping An and Ningxia Xiaoming 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 Ping An with a short position of Ningxia Xiaoming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Ningxia Xiaoming.

Diversification Opportunities for Ping An and Ningxia Xiaoming

0.65

Correlation Coefficient

Ping An  Ningxia Xiaoming

Poor diversification

The 3 months correlation between Ping and Ningxia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Ningxia Xiaoming Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Xiaoming Agr and Ping An 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 Ping An Insurance are associated (or correlated) with Ningxia Xiaoming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Xiaoming Agr has no effect on the direction of Ping An i.e., Ping An and Ningxia Xiaoming go up and down completely randomly.

Pair Corralation between Ping An and Ningxia Xiaoming

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Ningxia Xiaoming. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.86 times less risky than Ningxia Xiaoming. The stock trades about -0.04 of its potential returns per unit of risk. The Ningxia Xiaoming Agriculture is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,155  in Ningxia Xiaoming Agriculture on September 29, 2024 and sell it today you would earn a total of  87.00  from holding Ningxia Xiaoming Agriculture or generate 7.53% return on investment over 90 days.

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

Ping An Insurance  vs.  Ningxia Xiaoming Agriculture

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ningxia Xiaoming Agr

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningxia Xiaoming Agriculture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningxia Xiaoming sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Ningxia Xiaoming

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

The idea behind Ping An Insurance and Ningxia Xiaoming Agriculture 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.