Correlation Between Ningbo Construction and Zhongshan Broad

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

By analyzing existing cross correlation between Ningbo Construction Co and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on Ningbo Construction and Zhongshan Broad 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 Construction with a short position of Zhongshan Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Construction and Zhongshan Broad.

Diversification Opportunities for Ningbo Construction and Zhongshan Broad

0.72

Correlation Coefficient

Ningbo Construction  Zhongshan Broad

Poor diversification

The 3 months correlation between Ningbo and Zhongshan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Construction Co and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Ningbo Construction 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 Construction Co are associated (or correlated) with Zhongshan Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Ningbo Construction i.e., Ningbo Construction and Zhongshan Broad go up and down completely randomly.

Pair Corralation between Ningbo Construction and Zhongshan Broad

Assuming the 90 days trading horizon Ningbo Construction Co is expected to under-perform the Zhongshan Broad. In addition to that, Ningbo Construction is 1.99 times more volatile than Zhongshan Broad Ocean Motor. It trades about -0.11 of its total potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.17 per unit of volatility. If you would invest  573.00  in Zhongshan Broad Ocean Motor on October 1, 2024 and sell it today you would earn a total of  33.00  from holding Zhongshan Broad Ocean Motor or generate 5.76% return on investment over 90 days.

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

Ningbo Construction Co  vs.  Zhongshan Broad Ocean Motor

Ningbo Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Construction Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhongshan Broad Ocean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongshan Broad 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 Construction and Zhongshan Broad

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

The idea behind Ningbo Construction Co and Zhongshan Broad Ocean Motor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.