Correlation Between Ming Yang and China Baoan

Can any of the company-specific risk be diversified away by investing in both Ming Yang and China Baoan 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 Ming Yang and China Baoan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ming Yang Smart and China Baoan Group, you can compare the effects of market volatilities on Ming Yang and China Baoan 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 Ming Yang with a short position of China Baoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and China Baoan.

Diversification Opportunities for Ming Yang and China Baoan

0.84

Correlation Coefficient

Ming Yang  China Baoan

Very poor diversification

The 3 months correlation between Ming and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and China Baoan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Baoan Group and Ming Yang 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 Ming Yang Smart are associated (or correlated) with China Baoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Baoan Group has no effect on the direction of Ming Yang i.e., Ming Yang and China Baoan go up and down completely randomly.

Pair Corralation between Ming Yang and China Baoan

Assuming the 90 days trading horizon Ming Yang Smart is expected to generate 1.01 times more return on investment than China Baoan. However, Ming Yang is 1.01 times more volatile than China Baoan Group. It trades about 0.23 of its potential returns per unit of risk. China Baoan Group is currently generating about 0.13 per unit of risk. If you would invest  811.00  in Ming Yang Smart on September 23, 2024 and sell it today you would earn a total of  479.00  from holding Ming Yang Smart or generate 59.06% return on investment over 90 days.

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

Ming Yang Smart  vs.  China Baoan Group

Ming Yang Smart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Yang Smart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ming Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

China Baoan Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Baoan Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Baoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and China Baoan

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

The idea behind Ming Yang Smart and China Baoan Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.